Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)

LONDON TRANSPORT BILL (By Order)

HUMBERSIDE BILL [Lords] (By Order)

COUNTY OF KENT BILL) [Lords] (By Order)

Orders for Second Reading read.

To be read a Second time upon Thursday 16 April.

EAST SUSSEX BILL [Lords] (By Order)

Read a Second time and committed.

Oral Answers to Questions — NORTHERN IRELAND

Firearms

Mr. Canavan: asked the Secretary of State for Northern Ireland whether he will take further measures to control the number of firearms in Northern Ireland.

The Minister of State, Northern Ireland Office (Mr. Michael Alison): No, Sir. I am satisfied that adequate control is being exercised under the existing law by the Chief Constable.

Mr. Canavan: Is there not something wrong when in Northern Ireland—the most violent part of the United Kingdom—the number of firearm certificates per head of population is 1 in 18, while the ratio in England is 1 to 54, in Scotland, 1 o 42 and in Wales 1 to 32? Is it not time that the Government took steps to stop licensed gunmen taking part in Carson-type intimidation exercises led by the dog-collared hooligan, the hon. Member for Antrim, North (Rev. Ian Paisley)?

Mr. Speaker: Order. We can refer to one another in more polite terms.

Mr. Alison: The hon. Gentleman's statistics are misleading. The reason for the high ratio of firearms or gun certificates per head of population in Northern Ireland is due almost exclusively to the fact that in Northern Ireland, unlike other parts of the United Kingdom, air weapons need a firearms certificate. In practice, licensed firearms are rarely used in the commission of crime.

Mr. Kilfedder: Is it not correct to say that most of the 2,300 people murdered by the Provisional IRA in Northern

Ireland were murdered with illegally held guns or explosives, and that firearms are needed by individuals for their own defence?

Mr. Alison: I am happy to confirm the hon. Gentleman's fact and observation.

Mr. Bradford: Will the Minister confirm that, rather than a reduction, there should be an increase in the number of legally held weapons because many members of the part-time security forces are under threat from terrorists and require personal weapons for their own protection?

Mr. Alison: I cannot confirm such a sweeping generalisation, but members of the security forces have ready access to personal protection weapons on application, either to the Chief Constable or to the relevant Army commander in the case of people in the UDR.

Mr. Peter Robinson: As the vast majority of murders in Northern Ireland are carried out using illegally held weapons, what steps have the Government taken to stop weapons coming in from Communist countries?

Mr. Allison: We take every means to prevent the illegal import of any weapons.

Mr. James A. Dunn: Will the Minister review whether it is necessary to carry on licensing airguns, because they produce confusing statistics and the result is not always to the advantage of the Province? Will he also standardise the side arms that are issued to the security forces and make them all of the one calibre?

Mr. Alison: The hon. Gentleman's second question is a matter for more technical appraisal by the Chief Constable or by the Army personnel who are responsible for the issue of such arms. On the first point, I refer the hon. Gentleman to the answer that I gave to the effect that the overwhelming majority of weapons are not used illegally. The Chief Constable has a power of revocation, so it is possible to withdraw an air rifle or an airgun if it is used improperly or illegally.

Union with Great Britain

Mr. Marlow: asked the Secretary of State for Northern Ireland if he will introduce new proposals to strengthen the Union between Great Britain and Northern Ireland.

The Secretary of State for Northern Ireland (Mr. Humphrey Atkins): The strength of the Union is not in question. Both my right hon. Friend the Prime Minister and I have repeatedly made it clear that Northern Ireland will remain part of the United Kingdom for as long as that is the wish of the majority of the people of Northern Ireland.

Mr. Marlow: I wonder whether it would be helpful if we were to forget the qualification that my right hon. Friend has just made and if he were to make today a declaration in ringing tones, because he is confident that it will remain the wish of the people of Northern Ireland, that Northern Ireland is part of the United Kingdom and will always remain part of the United Kingdom. The people could then get on with enjoying being part of the United Kingdom rather than having the feeling about that there is everything to play for and that one day a British Government might get fed up with holding on to Northern Ireland, or the people of Northern Ireland might be pushed into removing themselves from the United Kingdom.

Mt. Atkins: The Government's present stance is based on the principle of self-determination, which I think commands general acceptance in the House.

Mr. Molyneaux: While the Secretary of State may not find it necessary to introduce legislation to give effect to the point made by the hon. Member for Northampton, North (Mr. Marlow), does he agree that it would strengthen the Union if he continued to use his endeavours to provide more efficient government at all levels in Northern Ireland, following the pattern in the rest of the United Kingdom? Does he also agree that the best way to strengthen the Union is to treat Northern Ireland on exactly the same basis as the rest of the United Kingdom?

Mr. Atkins: I shall not comment on part of the hon. Gentleman's question, because it is dealt with in subsequent questions on the Order Paper. I hope that he is not suggesting that Northern Ireland should be treated as if it were Northamptonshire. If we did that, it would cause considerable offence to a substantial part of the population and would not entirely satisfy the other part.

Mr. Biggs-Davison: While increased representation in the House, which we are waiting for, will strengthen the Union, will Ministers consider, in the advice that they may tender to the Crown, the increase of the representation of Northern Ireland in another place?

Mr. Atkins: That is not a matter for me, but I note what my hon. Friend says and I will ensure that his comments are made known to my right hon. Friend the Prime Minister.

Mr. Arthur Lewis: While the Secretary of State cannot agree to make the statement for which his hon. Friend the Member for Northampton, North (Mr. Marlow) asked, will he make a statement deploring the filthy murder of the poor mother who was doing her census duty? The whole House would support the right hon. Gentleman if he made such a statement.

Mr. Atkins: I thought that that matter would come up on a later question. The hon. Gentleman will have noted that the Minister who was on duty in Northern Ireland that evening issued a statement utterly deploring that callous, cowardly murder.

Mr. Concannon: Whatever steps the right hon. Gentleman is or is not taking to strengthen the Union, will he tell the House what is likely to happen as a result of the Anglo-Irish talks? Last week I met the Taoiseach and the Foreign Affairs Minister in Dublin, but it is unsatisfactory that I should have to trip off to Dublin to find out what is going on. Is the right hon. Gentleman aware that the Opposition agree in principle with the talks, but lack of information to us does not help?

Mr. Atkins: As I have often told the House, studies are going on between officials under the direction of my right hon. Friend the Prime Minister and the Taoiseach into ways of developing what they have discribed as the unique relationship between the United Kingdom and the Republic of Ireland—a description with which I agree. Officials will be reporting to my right hon. Friend and to the Taoiseach who will meet again later this year. When action is contemplated as a result of any suggestions that come forward the House will be informed.

Security

Mr. Michael McNair-Wilson: asked the Secretary of State for Northern Ireland if he will make a statement about the operations of the security forces in the Province.

Mr. Molyneaux: asked the Secretary of State for Northern Ireland if he will make a statement on frontier security.

Mr. Humphrey Atkins: Responsibility for all law enforcement operations, on the border or elsewhere, rests with the Royal Ulster Constabulary, which is supported as necessary by the Army. The primary aim of the Chief Constable, as of the Government, is to extend normal law and order conditions and normal policing to all parts of Northern Ireland. The RUC is continuing to make considerable progress in this direction, although, as the House knows, it is never my practice to discuss security force operations in detail.
In the border areas, six men were arrested in suspicious circumstances near the County Fermanagh border on 14 March. A number of firearms were recovered and all six men have been charged with serious offences, including one with murder.

Mr. McNair-Wilson: My right hon. Friend is clearly aware of the widespread revulsion over the brutal murder of Mrs. Joanna Mathers, the census collector in Londonderry. In order to ensure that her courage and sacrifice are not in vain, will my right hon. Friend give an absolute assurance that those who have sought to destroy, or not fill in, their census forms will be prosecuted?

Mr. Atkins: Anybody who breaks the law, whether by destroying census forms or by murdering a census enumerator, as happened in Londonderry two days ago, will be pursued with the utmost rigour by the RUC. The murder was a most despicable action by a man as yet undiscovered. I understand that the Provisional IRA has disclaimed responsibility, but the House will know that forensic tests have proved that the weapon has been used in more than one Provisional IRA punishment shooting.

Mr. Molyneaux: Is the right hon. Gentleman aware that the deployment of Army units in forward positions on the frontier has done a great deal to restore stability and confidence in that area and has led to the RUC and the UDR being free to concentrate on anti-terrorist activities elsewhere? Will the right hon. Gentleman ensure that that effective strategy is maintained?

Mr. Atkins: The deployment of Army units is primarily a matter for the General Officer Commanding, who is paying particular attention to the border areas, because there is a greater need for Army units to be deployed there than elsewhere. I am glad to hear the hon. Gentleman say that that strategy if giving comfort to those who live in border areas. It is also reducing the opportunities for terrorists to go about their evil works and increasing the chances of their being caught.

Mr. Kilfedder: If the IRA terrorist who foully murdered Mrs. Joanna Mathers has escaped, as is feared, across the border into the Irish Republic, he will be able to claim before the Eire courts that his offence was a political one and thereby escape extradition and the full rigours of justice. Will the right hon. Gentleman press the Eire Government to take action to end that disgraceful situation?

Mr. Atkins: The hon. Gentleman's remarks are hypothetical, but I take the point about extradition. He will know that the Government have often made clear, and will do so again, that we regard extradition as the most effective way of bringing fugitive terrorists to justice.

Mr. McCusker: Does the right hon. Gentleman agree that if the RUC is to be successful it must be afforded every reasonable facility to enable it to pursue terrorists? Is it not disgraceful that a young policeman died in my constituency last week because the RUC station at Bessbrook did not have sufficient car parking facilities'? The policeman had to park his car beyond the security surveillance and consequently terrorists were able to plant an anti-personnel device which blew him into three or four pieces.

Mr. Atkins: Obviously the RUC is anxious to take every possible step to protect, for example, the vehicles of its members and that was the case as regards the police constable whose car was destroyed by a bomb a little while ago. It is not always possible to give total protection to everybody and it is necessary to rely on the eternal vigilance of individuals.

Mr. Wm. Ross: rose—

Mr. Speaker: Order. I have just learnt that the lady concerned was a constituent of the hon. Member for Londonderry (Mr. Ross).

Mr. Ross: No, Mr. Speaker, she was not a constituent of mine.

Mr. Fitt: Is it not a fact that not only the Irish Government, but the United States Government, refuse to extradite known IRA people? Is it not also a fact that a person is pleading before the American courts that he was defending the Catholic population in Northern Ireland in 1978 when he committed firearms offences? Will the right hon. Gentleman take it from me that throughout the past 10 or 12 years of bloodthirsty murder in Northern Ireland the IRA has never defended the Catholic population in Northern Ireland?

Mr. Atkins: I shall take that from the hon. Gentleman, who knows as well as any of us about the IRA's activities. It remains Her Majesty's Government's view that extradition, as it is practised in Britain, is the best way of bringing to justice fugitive terrorists and fugitive criminals of all sorts. We wish that every other country would do as we do.

Mr. Concannon: Is the Secretary of State aware that it is the Opposition's view that the voters in Fermanagh and South Tyrone have a unique opportunity today to denounce the men of violence? Does he recognise that it is our view that a vote for Mr. Sands is a vote of approval for the perpetrators of the La Mon massacre, the murder of Lord Mountbatten at Warrenpoint and all the other senseless murders that have taken place in Northern Ireland over the years, including the latest brutal and inhuman killing of Mrs. Mathers, the census enumerator? We sincerely hope that those in Fermanagh and South Tyrone who attend the election today will take that attitude into the polling booth with them.

Mr. Atkins: I am glad to hear the right hon. Gentleman's point of view while speaking on behalf of the

Opposition. I do not believe that the electors of Fermanagh and South Tyrone need any guidance from me about the clear choice that is before them.

Natural Gas

Mr. Dunlop: asked the Secretary of State for Northern Ireland what are the latest developments in the negotiations for the supply of natural gas to Northern Ireland from the Republic of Ireland.

The Minister of State, Northern Ireland Office (Mr. Adam Butler): The possibility of supplying natural gas from the Kinsale field to Northern Ireland is being carefully evaluated in the light of information recently provided by the Department of Energy in Dublin and other considerations.

Mr. Dunlop: In view of the possibility of gas being discovered in both Counties Fermanagh and Tyrone, does the Minister agree that it is foolish to close down the gas installations in Northern Ireland? Will he defer—to use a famous phrase—this final solution of the gas problem until we ascertain whether there is a prospect of gas being discovered and used for the people of Northern Ireland?
For your information, Mr. Speaker, may I say that Mrs. Mathers was a constituent of mine. I have not been able to contact her home because of the vagaries of air travel from Northern Ireland. I intend to do so at the first opportunity.

Mr. Butler: The finding of commercial quantities of natural gas in Counties Fermanagh and Tyrone is still highly problematical and a long time scale is involved, as is the case with the possibility of a supply from the Republic. The Government's policy on the rundown of the town gas industry remains what it was. We believe that planning must go ahead. I hope to be able to make a more positive statement within a very few weeks.

Mr. James A. Dunn: Will the Minister take the opportunity not only to explore the potential for the supply of natural gas from Southern Ireland but to ascertain whether a feasibility study would reveal some potential for the supply of natural gas from the North Sea, the Irish Sea or from the coast of Scotland? Does he agree that, at the end of the day, a dependency on one form of energy is not necessarily an advantage?

Mr. Butler: Other things being equal, I agree with the last part of the hon. Gentleman's supplementary question. We have two licences for exploration, onshore and offshore, in the Province. The Government have made their position clear about any connection with Scotland. There is no change of view on that score.

Mr. Dickens: My hon. Friend has stated that the gas link between the Irish Republic and Northern Ireland is under consideration. Is he still taking seriously the possibility of regenerating Northern Ireland employment prospects by continuing to consider either the conversion of the Kilroot power station to coal or the construction of a new coal-fired power station in Northern Ireland, so that, if a gas link is possible between the South and the North, there might equally be an energy link involving electricity generation from the North to the South, thereby providing many jobs in Northern Ireland?

Mr. Butler: The capacity for electricity generation in Northern Ireland is already in excess of demand, taking


into account the first phase of Kilroot. Therefore, I see no economic sense in increasing that capacity. Conversion is under consideration but large capital costs are involved.

Mr. J. Enoch Powell: In the light of Ulster's experience with electricity connection with the Republic, will the Minister bear in mind that a gas link would be vulnerable to interruption and that natural gas could be relied upon as a basis of industry in Northern Ireland only if there were a supply, as there should be, from the rest of the United Kingdom?

Mr. Butler: That is one of the considerations involved in energy supply from the Republic. We hope that the security situation will have so improved in the coming years that that consideration can be put aside.

Mr. Stephen Ross: Will the Minister reconsider the rundown of the existing gas plants in Northern Ireland until final decisions have been made on whether there is an availability of natural gas? Surely that policy would implement the Prime Minister's promise to level out energy prices within Northern Ireland, when there is surplus coal in the rest of the United Kingdom.

Mr. Butler: The hon. Gentleman must recognise that a £10 million subsidy is being paid per annum, which is holding down prices to half of what they should be in economic terms. Secondly, it is most probable that a large part of the distributive network will have to be replaced with a new pipe. We may be talking about almost a different type of fuel.

Mr. Concannon: As energy supply is one of the subjects under consideration by the joint study groups, will the Minister inform the House of the status that the groups findings will have and when they are likely to be reported? Will copies of their findings be available in the Library to hon. Members? Is the hon. Gentleman able to give us any information about the findings of the study groups?

Mr. Butler: I take it that the right hon. Gentleman is referring to the study groups of the United Kingdom and the Republic. If these issues are discussed, we shall determine whether it is appropriate to make the discussions public. The House should know that the present discussions are between Northern Ireland and Dublin direct. My officials have been in contact with officials in the Department of Energy in Dublin and, as necessary, there will be ministerial contact.

De Lorean Cars

Mr. Adley: asked the Secretary of State for Northern Ireland how many cars have been sold, at the latest convenient date, by De Lorean cars; and what is the total of public funds provided as at that date.

Mr. Cryer: asked the Secretary of State for Northern Ireland if he will make a statement on the progress of the De Lorean Car Co. Ltd.

Mr. Adam Butler: Employment at the company currently stands at about 1,300 and further recruitment is expected to raise this figure to 1,400 by mid-1981. I understand that no cars have been sold to date; 15 cars have already been despatched to America, and the first bulk shipment is now expected to take place at the end of next week. At 31 March 1981, the total amount of selective industrial assistance paid by the Department of

Commerce to De Lorean Motor Cars Ltd. was £47·7 million including £20·7 million of repayable loans and, in addition, the Northern Ireland Development Agency has subscribed £17·8 million for redeemable participating preference shares in the company.

Mr. Adley: As my hon. Friend was a spectator at the demise of MG, which could have been saved by the taxpayer with an investment of £20 million, will he say when the taxpayer will see a return on his investment in De Lorean?

Mr. Bruce-Gardyne: Do not be greedy.

Mr. Butler: The taxpayer will start to see a return on his money very shortly after the first shipment leaves Belfast docks.

Mr. Cryer: We welcome the jobs that the company has provided but will the hon. Gentleman explain the protection that the taxpayer has for this £70 million-plus investment? When negotiating the recent loan and guarantee, why did not he use his power to provide some shareholding to reverse the 90 votes per share that currently are vested in the De Lorean company, which is incorporated in America, as opposed to the one vote per share for the 17 million shares of the Northern Ireland Development Agency? Is not it true that the car is not owned by the taxpayer? Should not the taxpayer have greater protection?

Mr. Butler: The hon. Member knows that it was his Government who drew up the arrangements for the deal, including leaving the Northern Ireland Development Agency with the minority of voting shares. It was not appropriate, on the occasion of renegotiating a loan, to change that position.

Mr. Bruce-Gardyne: Will my hon. Friend tell the House whether the plant is still turning out 20 to 25 cars a day, as he reported the last time he came before the House? Is he aware that some of the suppliers to De Lorean appear to be encountering some difficulty in getting their bills paid?

Mr. Butler: The commercial relationship between De Lorean and its suppliers is not a matter for me. I am informed that this week the daily production of first-quality cars will be between 15 and 20.

Mr. Pendry: Does not the Minister accept that with the first consignment of cars already at Belfast docks and with a work force of 1,300, as he stated, De Lorean has already justified the involvement of successive Governments in its enterprise? Far from apologising, will not he join me in congratulating that company on its success and by doing so perhaps silence some of the critics in the House?

Mr. Butler: The company's success in reaching that position after two-and-a-half years is generally recognised by those who understand something about motor car production. The daily production of cars of 15 to 20 is about a quarter of what the company aims to achieve when the car is in maximum production. Therefore, I believe that the company has not done a bad job in the circumstances. I am happy to congratulate the management on the position that it has reached, but, equally, I look forward to the time when the plant is profitable and when the taxpayers' investment has been paid back.

Devolution

Mr. J. Enoch Powell: asked the Secretary of State for Northern Ireland why he authorised his Department to disclose now his intention to recommence talks on devolution in the summer.

Mr. Humphrey Atkins: No such sequence of events took place. However, I am happy to confirm that I remain ready to talk about political development in Northern Ireland as soon as the time is right.

Mr. Powell: Will the right hon. Gentleman keep a closer watch on certain officials in his Department who make it their business to communicate to the media indications of intentions and policies which are not necessarily his or the Government's? In that connection, will he keep a special eye on Mr. Christopher Thomas, whom those of us who are in the game have come to know as the "enemy wireless"?

Mr. Atkins: I do not think that the right hon. Gentleman listened to my answer, or perhaps I did not speak loudly enough. He asked me why I authorised my Department to disclose something, and I said that no such sequence of events took place. It did not take place.

Mr. Kilfedder: Is the right hon. Gentleman aware that the Ulster people are anxious to have a Select Committee that would sit at Stormont in Northern Ireland and debate matters such as unemployment, housing and health? Will the right hon. Gentleman agree to the establishment of such a Select Committee?

Mr. Atkins: The hon. Gentleman is in a slight state of confusion. Select Committees do not debate such matters. They inquire. If he is talking about a Northern Ireland Committee, that already exists.

Mr. Fitt: Will the Secretary of State confirm that it is still his intention and No. 1 priority to bring together the parties in Northern Ireland with the intention of creating a power-sharing executive, as we have had in the past?

Mr. Atkins: I have made it clear on many occasions that the Government seek a way forward that will be acceptable across both communities in Northern Ireland. As the hon. Gentleman knows, one of our difficulties last year was that, while he and his friends were insisting on power-sharing, that was not acceptable to the other section of the community. We still seek a way forward that is acceptable across the community.

Social Security Bill

Mr. Stallard: asked the Secretary of State for Northern Ireland when he next expects to meet the chairman of the Social Security Advisory Committee to discuss the implications of the Social Security Bill for Northern Ireland.

The Under-Secretary of State for Northern Ireland (Mr. John Patten): I have already had two meetings in Northern Ireland with the chairman of the Social Security Advisory Committee, when we discussed social security policy for Northern Ireland. I hope to meet him again during his next visit to Northern Ireland in October of this year.

Mr. Stallard: Does the Minister agree that the effects of the Social Security Bill now going through Parliament

will be to worsen an already difficult situation of deprivation, unemployment and hardship in Northern Ireland? Does he further agree that any worsening of the position will not help the general situation? When he comes to the House on Report and Third Reading, what steps will he have it in mind to take to try to alleviate some of the hardship that the Bill will cause in Northern Ireland?

Mr. Patten: I do not agree that that will be the effect. The Government are doing everything that they can to maintain a high level of social spending in the Province. The Social Security Bill will not have the effects suggested by the hon. Gentleman. No doubt he will make those points on Report, or on Third Reading if he is able to catch your eye, Mr. Speaker.

Mr. Bradford: Will the Minister, through me, answer the important question by the chairman? Why was the special heating allowance continued in Northern Ireland in respect of supplementary benefit and family income supplement, bearing in mind the high energy costs and low incomes in the Province?

Mr. Patten: The special provisions were discontinued because of the economic situation. It will not have escaped the attention of the hon. Gentleman that my right hon. Friend the Prime Minister, in her recent visit to the Province, made the welcome announcement about bringing domestic electricity tariffs more closely into line with those on this side of the water. He will also realise its general beneficial effect on people who are on or near the poverty line on a continuing basis.

Mr. Pendry: Does the Minister not accept that Northern Ireland is the poor relation of the United Kingdom? What positive steps is he taking to improve the level of benefits, instead of finding ways of keeping them down? Why does he have to wait until October before he meets the chairman again?

Mr. Patten: I refute the suggestion of the hon. Gentleman, who should know better from his experience in the Province, that we are trying to keep down the level of social security payments there. That is not correct.

Mr. Stallard: The Minister is trying to reduce them.

Mr. Patten: The Province benefits greatly from the fact that the social security mechanism is linked in parity terms with the mainland. That is an advantage for the Province, not a disadvantage.

Mr. Stallard: Utter rubbish.

Constitutional Proposals

Mr. Biggs-Davison: asked the Secretary of State for Northern Ireland what progress has been made in considering proposals for the better government of the Province.

Mr. Humphrey Atkins: As I told the House in my reply to my hon. Friend the Member for Skipton (Mr. Watson) on 19 March, I have decided to make the machinery of government in Northern Ireland more efficient and accountable to my direction and control, and to merge the control functions of the Northern Ireland Departments of Finance and of the Civil Service. Consideration of the best way of achieving this merger is due to be completed very soon. An important part of our purpose is to enable the Administration to deal more


effectively and vigorously with economic development and social affairs in Northern Ireland. I hope to be able to make further proposals to the House during the summer.

Mr. Biggs-Davison: As about half the Northern Ireland Roman Catholics now support the Union, but there is disagreement on forms of devolution, should we not decide that the improvement of administration and local government in the Province should rest upon the supremacy of one Parliament zealous for equal rights under the Crown?

Mr. Atkins: Yes, Sir, it does, and it will continue to do so. On the other hand, the parties to whom my hon. Friend referred have all stated that they want greater democratic control to be in the hands of the people elected in the Province. I agree with them. That is what the Government will continue to seek to do, but until we can find a way forward it is our business to seek to make the machinery of government in Northern Ireland as efficient as we can.

Mr. James A. Dunn: Will the Secretary of State reconsider his decision to merge the Department of the Civil Service and the Department of Finance, because there will not necessarily be any advantage if that is done? At the end of the day, there are problems of enrolment into the Civil Service that cannot be dealt with through the Department of Finance. I urge the Secretary of State to reconsider his decision.

Mr. Atkins: No, Sir, I do not propose to reconsider my decision. I arrived at it after careful consideration. With a total of about 32,000 people, there is no need for a separate Department of the Civil Service.

Constitutional Proposals

Mr. Stanbrook: asked the Secretary of State for Northern Ireland if he intends to institute discussions with Northern Ireland political parties with a view to proposing a devolved system of government.

Mr. Humphrey Atkins: I frequently meet representatives of the political parties and discuss political matters with them, but, as I told the House on 12 March, I do not believe that this is an appropriate moment for any major new move on the political front.

Mr. Stanbrook: As there has been an absence of devolved government in Northern Ireland for many years, is it not time that we started implementing our manifesto commitment?

Mr. Atkins: I hope that my hon. Friend will refresh his memory about our manifesto commitment. I have it here. We are seeking a way forward that commands the support not only of the people of Northern Ireland, but of the House. Although we have not so far found it, I hope that we shall do so. In the meantime, I refer my hon. Friend to the answer that I have just given to my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison).

Mr. Fitt: Does the Secretary of State accept that, although there may be considerable doubt in Northern Ireland about whether the vast majority of Roman Catholics support the Union, we can be sure that they are opposed to the IRA and to violence? Is he aware that one way to ensure that Roman Catholics are totally opposed to

the Union is to restore power to local government in the way that it was constituted before the reformation in 1973, which would cause massive political conflict?

Mr. Atkins: That is a fact that I am taking into account in my consideration of how we can move forward politically in the Province.

Mr. Kilfedder: Can the Secretary of State assure us that the machinery of government in Northern Ireland is not being discussed by the Anglo-Eire study group and that the United Kingdom is not engaging in horse trading to exchange Ulster's future for Eire becoming part of NATO and Dublin becoming a nuclear zone?

Mr. Atkins: I give the hon. Gentleman both those assurances. The internal affairs of Northern Ireland are not being discussed in Dublin. We do not wish to raise defence matters and NATO membership bilaterally with Dublin, and they have not been mentioned.

Unemployment

Mr. Dubs: asked the Secretary of State for Northern Ireland what further proposals he has to reduce the level of unemployment in Northern Ireland.

Mr. Adam Butler: A number of measures have already been taken to alleviate unemployment in Northern Ireland. I shall continue to pursue the Government's policy of promoting industrial development in the Province with my customary vigour.

Mr. Dubs: Will the Minister confirm that in some towns and areas of Northern Ireland the number of men unemployed is almost half the total? Unemployment is now so high that it is damaging the social fabric of many communities and his proposals are so feeble as to be contemptuous of a real social problem.

Mr. Butler: Unemployment in the Province is nearly twice as high as in Great Britain, which is why we have taken special measures in the Province to increase the youth opportunities programme and the short-term working compensation scheme, and to introduce a new scheme for the adult unemployed. The hon. Gentleman should study what we are doing.

Mr. Dickens: In the hope of encouraging more trade between Northern and Southern Ireland, and consequently creating more jobs, will my hon. Friend initiate talks between the Northern Ireland Development Agency and the Industrial Development Agency so that companies on both sides of the border can be included in the approved lists of both agencies?

Mr. Butler: That would not be appropriate. NIDA's job is to encourage inward investment in the Province, and it is making a success of that.

Mr. Pendry: Does the Minister accept that the only way to reduce unemployment in Northern Ireland is to have a coherent regional strategy that is designed to encourage investment and create jobs? Has he noted the strength of feeling among trade unionists in the Province during this week of action? Why is he doing so little to reduce unemployment?

Mr. Butler: The Government have a three-pronged strategy for the Province to improve employment


prospects—encouraging established industries, building on small businesses and attracting inward investment. We are succeeding on all counts.

Republic of Ireland (Ministerial Meetings)

Mr. Flannery: asked the Secretary of State for Northern Ireland when the next meeting at ministerial level with the Republic of Ireland will take place.

Mr. Humphrey Atkins: There are no firm plans for any meetings at this moment, but meetings will continue to take place as and when appropriate between myself and my colleagues and Ministers from the Republic, as in the case of my noble Friend the Under-Secretary of State's meeting with the Republic's Minister of Fisheries and Forestry last week in Northern Ireland.

Mr. Flannery: Although the first meeting with leading Ministers in the Republic caused a great flush of hope among the vast majority of people that a new initiative to solve the intractable problem was under way, does the Minister accept that it is necessary for everyone to know a great deal more about what is happening? Next time that there is a meeting, even though we are at a transitional stage, will he ask the Prime Minister to give us a full report on which we can question her?

Mr. Atkins: I am glad that the hon. Gentleman is pleased about such meetings. They will continue. His second question does not relate to the main question, which concerns meetings between Ministers from the Republic and Northern Ireland Ministers. I am happy to tell the hon. Gentleman what happens at such meetings. At the meeting between my noble Friend and the Republic's Minister of Fisheries and Forestry they discussed fish.

Oral Answers to Questions — PRIME MINISTER

Confederation of British Industry

Mr. Norman Atkinson: asked the Prime Minister when next she intends to meet the leaders of the Confederation of British Industry.

The Prime Minister (Mrs. Margaret Thatcher): I have no immediate plans to do so.

Mr. Atkinson: Does the Prime Minister accept that when members of the CBI ask her about the 174 bankruptcies each week she cannot try to placate them, as she tries to do the TUC and the 364 economists, by saying that all will be well in the end, because the CBI is saying that the state of British industry is such that when she makes the call for the upturn it will not be in a position to respond?

The Prime Minister: The CBI backs the Government's broad general strategy. Industry will be in a position to respond because it is now reducing over-manning and making itself competitive. That is the best contribution that it can make to Britain.

Mr. Bruce-Gardyne: In discussions with the CBI, will my right hon. Friend bear in mind the fact that although it serves purposes of enormous value, its advice to the Government has not always been of totally certain value? In 1971, the CBI devised a scheme that wrecked the

financing of nationalised industries for five years. Will she welcome its advice, but treat it with the respect that it deserves?

The Prime Minister: The CBI's advice has not always been wholly dispassionate, but we took its advice recently and gave top priority to reducing interest rates. The CBI fully supports the Government in that priority.

Mr. Cryer: Is the Prime Minister aware that next Saturday there will be a massive TUC demonstration in Bradford, led by the trade union and Labour movement, against the Government's policies, which are creating mass unemployment? The textile industry has modernised and shed jobs, but it is still facing lengthening dole queues because of Government policy. What will she do to restore the industry's confidence?

The Prime Minister: We would have a larger textile industry if more people bought British products. I wish that hon. Members on the Opposition Benches would address themselves to the real reason why our industry is not doing as well as it should, which is that many people buy foreign goods in preference to British goods.

Boundary Commissions (Departmental Co-ordination)

Dr. Edmund Marshall: asked the Prime Minister whether she is satisfied with the degree of co-ordination between the Civil Service Department and the Home Office in determining the approved complement of staff of the English and Welsh Parliamentary Boundary Commissions.

The Prime Minister: Yes, Sir.

Dr. Marshall: In view of the inconsistency between the reduction of more than 4 per cent. in the number of non-industrial civil servants (luring the past two years and the simultaneous increase in the staff of the Boundary Commissions by 60 per cent., is it not clear that the Government choose to ignore their own policies when they believe that their own preservation is at stake?

The Prime Minister: The Boundary Commission operates independently under the chairmanship of Mr. Speaker. It has sufficient staff to enable it to carry out its task in the statutory time allotted to h. I do not think that we can expect advice from the Opposition on anything to do with Boundary Commissions, in view of their record in 1969.

Engagements

Mr. Geraint Howells: asked the Prime Minister if she will list her official engagements for Thursday 9 April.

The Prime Minister: This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today.

Mr. Howells: Will the Prime Minister find time today to tell the British public that she is convinced that she will reform the common agricultural policy during her term of office?

The Prime Minister: Weshall make every effort to do so, and we shall make particularly strenuous efforts during our Presidency in the latter half of this year. It is an urgent matter.

Mr. George Gardiner: In view of certain press reports this morning, will my right hon. Friend take the opportunity today to reassure us that no Cabinet decision has yet been made on what action might be appropriate following the Green Paper on trade union immunities, and that no such decision will be made until the consultation period on the Green Paper is complete?

The Prime Minister: Of course no decision will be made until we have received the consultations on that very important paper. I am glad to reassure my hon. Friend.

Mr. Foot: Will the right hon. Lady take a very early opportunity today—namely, at the Dispatch Box now—to disown and condemn the Tory Action leaflet circulating in London under the title "Round Robin for March 1981", which is clearly racist and Fascist in its implications? Is she not eager to condemn that leaflet in the strongest possible terms?

The Prime Minister: I neither know nor have seen such a leaflet, but I gladly condemn all racism and Fascism.

Mr. Foot: The right hon. Lady may not have seen the leaflet—and I understand that—but, having expressed a desire to condemn racism of this nature, will she take immediate steps to obtain a copy of the leaflet and to secure the support of the so-called Tory immigration group to condemn the leaflet too? Surely the whole House would wish to condemn this form of racist propaganda.

The Prime Minister: I totally condemn racism and Fascism. I never condemn something that I have not seen.

Mr. Heddle: Will my right hon. Friend take time today to consider the growing impatience and frustration of tens of thousands of council tenants throughout the country, but particularly in 27 Labour-controlled council areas, who wish to exercise their democratic right to buy their own homes? Will she give some advice and encouragement to them today so that in the near future they may be able to do so?

The Prime Minister: Local councils should assist tenants to exercise their legal rights, including the legal right to purchase their council houses. My right hon. Friend the Secretary of State for the Environment is in touch with a number of councils that seem to be delaying matters, and he will consider very shortly what action he should take if they do not comply.

Mr. Greville Janner: Will the right hon. Lady have time today to consider the serious problems created for the Marconi radar company by the threatened cancellation of orders for naval equipment, which is produced mainly in my constituency, and the substitution of orders for Dutch equipment, so that much unemployment will be caused? Will she investigate the matter and see whether it is possible to buy British equipment, the research for which has been carried out at public expense, and which has now been produced to the precise specifications of the Ministry of Defence?

The Prime Minister: We try to buy British wherever possible and make strenuous efforts to do so even on some occasions when it costs just a little more. But we also have to consider the expense. Perhaps the hon. and learned Gentleman will take up the case direct with my right hon. Friend the Secretary of State for Defence.

Mr. Beith: Will the Prime Minister find an opportunity to explain why she sent the Solicitor-General to Strasbourg to defend the case brought by the three sacked British Rail employees? If she was so keen that he should go to Strasbourg, why did she not send him briefed to defend the three employees and to support their case, when they had been sacked from their jobs on a matter of conscience?

The Prime Minister: My hon. and learned Friend the Solicitor-General made it perfectly clear that the law under this Government was totally different from the law when that case arose. He would greatly resent what the hon. Gentleman has said, and so do I.

Mr. Neubert: asked the Prime Minister whether she will list her official engagements for 9 April.

The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.

Mr. Neubert: Will my right hon. Friend comment on the damage being done to the effectiveness of the Polaris force by a handful of civil servants during the current dispute? Does not their action strike at the heart of the nation's defences, and should not the possibility of such sabotage be excluded from their conditions of employment?

The Prime Minister: I do not think that the British people will think very much of a minority of public servants who choose to put personal gain above the safety of the realm. I make it clear that the nuclear deterrent is still effective, and will remain effective, and we shall take all steps to see that it does.

Mr. Bidwell: On her forthcoming visit to India, how will the right hon. Lady meet the criticism that the British Nationality Bill is anti-feminist with regard to the application of the present immigration rules? Will it not be difficult for the people of India to understand the position of Britain's first woman Prime Minister in this matter?

The Prime Minister: I do not envisage any particular difficulty.

Mr. Viggers: Will my right hon. Friend accept from one who represents a defence area that the action by civil servants to prevent the servicing of Polaris submarines is resented by many members of the Civil Service unions, many of whom are heartily sick of the action that is taken in their name?

The Prime Minister: I think that that action is both deeply resented and not understood. I have already commented upon it. I must make it clear, however, that just as we condemn those who seek to put defence and the nuclear deterrent at risk, so we should thoroughly applaud the vast majority of public servants who loyally stay at their jobs and take on extra duties so that the intelligence services and the safety of the realm shall continue.

Mr. James Lamond: Before the right hon. Lady takes up too much of her time today worrying about those council tenants whose legal right to buy their houses she believes is being thwarted, will she take time to consider the far higher priority of the hundreds of thousands of would-be council tenants whose human rights are being offended by the fact that the Government's policy will mean that no council houses will be provided in the next two or three years?

The Prime Minister: I shall do everything to see that the legal rights of council tenants to purchase their own houses are honoured. The hon. Gentleman should remember that more than 100,000 council houses are vacant, and have been for some time.

Mr. Gordon Wilson: asked the Prime Minister if she will list her official engagements for 9 April.

The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.

Mr. Wilson: Is the Prime Minister aware of the anger in Scotland at the proposed takeover of the Royal Bank of Scotland by two banking companies competing for it? Will she take time today to meet the Secretary of State for Trade and request him to refer the whole question to the Monopolies and Mergers Commission without delay?

The Prime Minister: I believe that the legal position is that the Director General of Fair Trading has to consider the matter and make his recommendation to my right hon. Friend the Secretary of State for Trade, who in turn will make his decision about a reference to the Monopolies and Mergers Commission before the final day for the bid.

Mr. Bill Walker: Will my right hon. Friend, during her busy day, find time to discuss with her Cabinet

colleagues the problems in Dundee, where we have seen a surge of anti-semitism, 'which is a direct result of the flying of the PLO flag and the twinning of Dundee with Nablus?

The Prime Minister: Of course, I condemn wholly and utterly any anti-semitism anywhere in the United Kingdom. The purpose of twinning is for the people of each town to get to know each other better. I am sure that many people in Dundee would wish that their local council would give attention first to local matters.

Mr. Hardy: One cannot expect the Prime Minister to send a greeting to the Labour movement's rally in Bradford on Saturday, but will she at least consider sending an appropriate message to the rally that is to he held in Hyde Park on Sunday, organised by all the national youth bodies and led by the Rotherham youth service? It is a rally that is to be colourful, responsible and nonpartisan. What message would the right hon. Lady can; to give that rally?

The Prime Minister: That the best way to create jobs in the future is to get British industry competitive, that that is already happening, and that one of the main ways to do that is to fight inflation, because unless we beat inflation we shall not get industry competitive or have the jobs here.

Business of the House

Mr. Michael Foot: May I ask the Leader of the House to make a statement about the business for next week?

The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): The business for next week will be as follows:
MONDAY I3 APRIL—Second Reading of the Finance Bill.
Proceedings on the following Consolidation Bills:

English Industrial Estates Corporation [Lords]
Film Levy Finance [Lords]
National Film Finance Corporation [Lords]
Public Passenger Vehicles [Lords] and
Second Reading of the Judicial Pensions Bill [Lords].
TUESDAY I4 APRIL—Remaining stages of the Transport Bill.
WEDNESDAY I5 APRIL—Supply [17th Allotted Day]: Debate on the economic and social problems of the Northern region, on a motion for the Adjournment of the House.
THURSDAY I6 APRIL—The House will meet at 9.30 am, take Questions until 10.30 am and adjourn at 3.30 pm until Monday 27 April.

Mr. Foot: Will the right hon. Gentleman make arrangements for a statement to be made to the House, before the recess, on the Civil Service dispute? Will he accept that the Opposition—and, I am sure, many people in the country—are entirely dissatisfied with a position in which the Government are saying "No offer, no negotiations, no arbitration, no steps taken to deal with the dispute"? May we have a statement from the Government on the action that they will take to bring the dispute to an end?

Mr. Pym: As the right hon. Gentleman says, there is wide interest in this important dispute. I shall discuss his request with my right hon. and noble Friend the Lord President of the Council and with my hon. Friend the Minister of State, Civil Service Department, and try to see whether I can arrange a statement before the House rises for the Easter Recess.

Mr. Geoffrey Rippon: Has my right hon. Friend had a further opportunity to consider early-day motion 196, in my name and the names of over 160, hon. Members?
[That this House requests Her Majesty's Government to provide time at an early date for the Second Reading of the Bill of Rights Bill [Lords] which is intended to render the provisions of the European Convention for the Protection of Human Rights enforceable in the courts of the United Kingdom and which has been brought to this House after passing through all its stages in the House of Lords.]

Will my right hon. Friend at least confirm that the Government would wish to give time to this Bill, which has passed twice through all its stages in the House of Lords and has been warmly and publicly commended by the Lord Chancellor?

Mr. Pym: Although I entirely accept the importance of the subject dealt with in the Bill, it is, none the less, a private peer's Bill, and I do not think that I am able to

find time for private Members' business except in private Members' time. I am sorry to have to give that disappointing reply to my right hon. and learned Friend.

Mr. Charles R. Morris: Is the Leader of the House aware that in a few more days a whole year will have passed since 146 British air passengers, including some of my constituents, lost their lives in the Dan-Air Tenerife air disaster, and that we are still awaiting a report on the causes of that disaster?
Will the Leader of the House accept that during that whole year all that we have had from the Government so far is one ministerial statement and a multiplicity of different replies to parliamentary questions? Will he arrange for a ministerial statement to be made next week explaining the supine attitude of the Department of Trade and the Foreign and Commonwealth Office to the lethargy of the Spanish air authorities in this matter?

Mr. Pym: I shall take an early opportunity to inform myself of that matter and see what progress has been made.

Mr. Alan Clark: As the Director of Public Prosecutions has now quite openly abandoned the ancient precept of the common law relating to violence against the person and damage, and substituted his own judgment of what constitutes racial harmony in determining whether or not to prosecute, and as this is manifestly a political judgment, would it not be appropriate for the House of Commons to debate the status of this incumbent?

Mr. Pym: I certainly would not wish to say that it would be inappropriate to do that, but I do not think that I can find an opportunity for doing so. There may be other opportunities that my hon. Friend can take, but that is as far as I can go.

Mr. Clive Soley: Will the Leader of the House arrange for a debate on the growing problem of racialism in this country, particularly in view of the effect that unemployment is having on the ethnic minority group, as shown by recent reports?

Mr. Pym: My right hon. Friend the Home Secretary has this matter very much under review at the moment. It is, of course, a topic that could be debated in the House at any time. The hon. Gentleman may have to find another opportunity, rather than Government time, for that subject, but I am sure that the House will return to it at some point.

Mr. Michael Hamilton: My right hon. Friend will know that the hops industry requires legislation in order that its arrangements may accord with those of the European Community. Will he give an assurance that this relatively small matter will be attended to before the House rises for the Summer Recess?

Mr. Pym: The Government wish to legislate on this subject. It is necessary. I do not think that it will be possible to do so before the Summer Recess. I can only say that we wish to legislate as soon as time permits.

Mr. David Ennals: On the Transport Bill, the remaining stages of which are to be taken on Tuesday, will the Leader of the House say whether time will be given for a debate and a vote on the seat belt issue? As he knows, the wearing of seat belts is supported by many hon. Members on each side of the House. If he will


not give that assurance, will he explain why the Government will not permit a vote on an issue on which hundreds of lives and many thousands of serious injuries depend?

Mr. Pym: As the House knows, the Transport Bill is a Government Bill and it is now subject to a timetable motion. Under that motion, the Business Committee was established to decide how the time would be split up. As the right hon. Gentleman will know, the Committee has reached a conclusion.
I remind the right hon. Gentleman that the Transport Bill did not include any proposal in relation to seat belts. When the House decided upon the timetable motion, I understand that the seat belts issue was not then before the Committee. In dealing with a Bill under a timetable motion, the right hon. Gentleman is, therefore, asking for time in which to deal with a matter that was not part of the original Bill, and was not part of it at the time that it was guillotined. The right course to adopt is to adhere to the arrangements made by the Business Committee.
There is, of course, interest in the seat belts issue. The right hon. Gentleman can find other ways in which that matter can be raised on the Floor of the House if it turns out that his proposed addition to the Bill is not debated.

Mr. Edward Gardner: Will my right hon. Friend say whether the Bill of Rights, to which my right hon. and learned Friend the Member for Hexham (Mr. Rippon) referred a few moments ago, could be a Bill that the Government themselves would introduce?

Mr. Pym: Not at this stage. It is a major matter, about which hon. Members in all parts of the House have views. It is something that we could consider, but certainly there is no prosepct of that in the near future.

Mr. Clement Freud: Will the Leader of the House consider providing time for a debate on the new practices of the DHSS? Is he aware of its advice to investigators, at paragraph 505 of the document concerned, namely, that they should ask
when and where sexual intercourse first took place and how often thereafter and during what period".
Although the House realises that the Conservative Party stands for the family, would it not be a good idea to stand a little further away?

Mr. Pym: The hon. Gentleman should put such a question to my right hon. Friend the Secretary of State for Social Services.

Mr. Robert Adley: Referring to the point raised by the right hon. Member for Norwich, North (Mr. Ennals), is my right hon. Friend aware that what he said is not satisfactory, because under the timetable arrangements the new clause that will be introduced by the Government on road humps will, I suspect, take up all the time allowed for new clauses under the guillotine? Is he aware that that provision was not in the original Bill either, which tends to negate my right hon. Friend's point? Will he accept, therefore, that whatever one's views on seat belts, many people feel that the House has a duty to make up its mind one way or the other? If the Government do not provide the time my right hon. Friend knows that that will not happen.

Mr. Pym: The position is that the Government proposed the Bill without any provisions on seat belts. The Government have decided, rightly or wrongly, that they

will not legislate on seat belts. The House came to a conclusion on a timetable motion and established a procedure for dividing up the time. That process has proceeded, and the House can and should adhere to it.
I appreciate the interest of my hon. Friend and others, but to accuse the Government of not providing time under a timetable motion for a Bill not related to seat belts is not altogether fair. There are other ways in which the matter can be resolved, if the Government so decide, but not under the guillotime motion on which the House has already decided.

Mr. K. J. Woolmer: When the Minister is considering the Civil Service dispute will he draw to his noble Friend's attention the fact that the way in which the dispute arose and the way in which it has subsequently been handled have deepened the strength of feeling of injustice among civil servants? Will he draw the attention of his colleagues to the fact that civil servants wish to avoid, as far as possible, damaging the public, for example, by withholding child benefit, pensions, and similar benefits? Will he draw the attention of his colleagues to the need for a full airing of the matter in the House? It should be a matter of concern, whatever our views about its merits.

Mr. Pym: As I said to the right hon. Member the Leader of the Opposition, I will consult my right hon. and hon. Friends to consider whether we can arrange a statement before we rise for the Easter Recess.

Mr. Roger Moate: Reverting to the Transport Bill, I believe that my right hon. Friend is being somewhat less than fair to the House, inasmuch as it seems likely that the Government will pre-empt much of the limited time available by introducing their own new clauses, which could have been introduced in other ways. Will he recognise that where a guillotine is secured on the basis of the loyalty of their colleagues the Government should be careful about how they allocate the time available? Will he take steps to ensure that the limited time available for new clauses is not pre-empted by new clauses on road humps, which surely must be less important than seat belts?

Mr. Pym: The earlier new clauses to which my hon. Friend referred could go through quickly. Of course, a debate on seat belts would be welcome and acceptable. The arrangements made for the handling of the Bill have been decided by the House, and it is not within my power to alter that.

Mr. William Hamilton: Will the Leader of the House make a statement this week on the reprehensible practice of farming out to Conservative Members planted questions for putting to the Prime Minister on Tuesdays and Thursdays? Question Time is farcical enough, without adding to that farce.

Mr. Pym: That is a fairly long-established practice, although I was not aware that it was going on at the moment.

Mr. Sydney Chapman (Chipping Barnett): Will my right hon. Friend tell the House, as it would be helpful to both sides, what business he intends to take on the day that we come back after the short Easter recess—Monday 27 April? More specifically, when does he intend to take the Second Reading of the Wildlife and Countryside Bill?

Mr. Pym: I am afraid that I cannot announce business for that week yet. I will do so next week.

Mr. James A. Dunn: Will the Leader of the House ask his right hon. Friend the Prime Minister to make a statement on unemployment consequential on her meeting, in Neston tomorrow, the Conservative leader of the Merseyside county council? Will he also ask her, when she makes that statement, to explain why she held that meeting and refused to meet the leaders of the religious organisations and all the political parties from Merseyside?

Mr. Pym: I shall convey that point to my right hon. Friend, but the hon. Gentleman will be able to question the Prime Minister next week.

Mr. Jonathan Aitken: Will my right hon. Friend tell the House what messages he has received from Canada about the possible timing of the arrival of the federal Government's request for constitutional legislation in the House? Is he aware of the strong feelings in the House that whatever may or may not be promised in Canada the House should not tackle the legislation until the Supreme Court of Canada has given a definitive ruling upon it?

Mr. Pym: This subject is still before the federal Parliament in Ottawa. Clearly it will be there for some time yet. Until those proceedings are over, it would not be appropriate or correct for me to make a statement about it.

Mr. George Foulkes: Does the Leader of the House recall that some weeks ago he promised that we would have a debate on the report of the all-party talks dealing with Scottish business in the House? Is it not stretching the English language and our patience to realise that it is almost Easter and we have still had no such debate, especially as the Government promised the people of Scotland that the issue would be dealt with urgently?

Mr. Pym: I intend to table the relevant motion or motions shortly. I am sorry that I have not done it before, but there have been consultations between the right hon. Member for Glasgow, Craigton (Mr. Milian) and my right hon. Friend the Secretary of State for Scotland.

Mr. Michael Brotherton: I return briefly to the Transport Bill. Is my right hon. Friend aware that the vast majority of people wish to have no part in the do-gooding nonsense of the compulsory wearing of seat belts?

Mr. Pym: I note what my hon. Friend says.

Mr. John Home Robertson: Does the Leader of the House remember an earlier incarnation, during which he considered the Government of Scotland and devolution? Does he remember saying that the status quo was not an option? In view of that, will he say when the Scottish Grand Committee, at least, will be allowed to meet in Edinburgh?

Mr. Pym: That will be for the House to decide. Soon I hope to table motions that will lead to the debate on which that decision can be concluded. I hope that there will be a chance to deal with that fairly soon after Easter.

Mr. W. Benyon: I appreciate that the Government may not be in a position to proceed with the

House of Lords' Bill of Rights, but on this vital constitutional matter is there not much to be said for having a debate in the House at the earliest possible moment?

Mr. Pym: I should be prepared to have such a debate, but I do not think that it has sufficient priority to warrant the allocation of Government time at present. If, in the event, there is time, we could arrange such a debate, but otherwise my hon. Friend will have to find another way to bring up that subject, if he is successful in the ballot or in some other way.

Mr. Christopher Price: Is there anything that the Leader of the House can do about the dilatoriness of Government Departments in replying to Select Committee reports, as he promised he might in a debate in January? Is he aware that although the Procedure Committee recommended a period of two months, nearly six months have now passed, during which the Department of Education has failed to reply to two reports from the Select Committee on Education? As there is now a crisis in universities and higher education, and if the Select Committee system is to work properly, is he aware that there needs to be a continuing dialogue and that it should not be in the hands of Ministers to bring such a dialogue to a halt by sitting on reports and refusing to reply to them? Can he do anything about it?

Mr. Pym: I am not aware of that, but I shall inquire.

Mr. Peter Bottomley: Is my right hon. Friend aware that his words on seat belts will be welcomed, in so far as he said that he would like to be able to give the House the opportunity to decide the question? Is he aware that we are asking not for the guillotine motion to be rejigged but for the Business Committee to consider the way in which the new clauses will emerge. Perhaps in that way or some other way it will be possible for the House to make a decision, as the Committee managed to decide on another aspect of seat belts that also arose after the guillotine motion had been passed.

Mr. Pym: It is not within my power to adjust the decisions reached by the business committee. When the issue comes before the House it will have to decide on what the Committee recommends. It will be possible to deal with the early new clauses quickly, because they are not particularly controversial. That would allow time to deal with seat belts. That seems to be a satisfactory arrangement.

Mr. Bob Cryer: Will the Leader of the House provide time for a debate on electricity generation? Is he aware that I tabled a question in January and that the CEGB recently supplied an answer to that question? Is he aware that that reply shows that the costs of nuclear powered generation are extremely high, and are likely to be an increasing burden and an increasing potential danger? Does he agree that the subject has not been properly ventilated in the House, particularly since the Government apparently are lumbering towards building 10 pressurised water reactor stations, at enormous cost? Does the Leader of the House agree that that is a suitable subject for debate?

Mr. Pym: Yes, I do. That is why one of my hon. Friends chose the subject on a private Member's day, when we spent five hours debating energy policy. The Atomic Energy (Miscellaneous Provisions) Bill also


provided an opportunity for the House to debate the subject of energy. There have been several opportunities to debate it.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call hon. Members who have been standing in their places.

Mr. Dennis Skinner: Will the Leader of the House arrange for a full-scale inquiry into the disposal of toxic waste? Is he aware, for example, that the deadly poison dioxin, which was developed and manufactured from Coalite, resulted in an explosion in 1968? Is he aware that some of the debris of the dioxin was dumped in the constituency represented by my hon. Friend the Member for Derbyshire, North-East (Mr. Ellis)? Does he know that recent reports reveal that three more sites were used to get rid of that deadly poison, including one in my constituency?
Is the Leader of the House further aware of the great public concern, not only about the disposal of dioxin but about the disposal of many other toxic substances? Is he aware that such toxic substances are being imported and dumped in Britain? It is not time that the right hon. Gentleman consulted his colleagues to ensure that there is a full inquiry?

Mr. Pym: My responsibilities may be vast and comprehensive, but I do not think that they include that subject. However, I shall draw my right hon. Friend's attention to what the hon. Gentleman says.

Mr. Ivor Stanbrook: On what constitutional principle did the Government feel obliged to support the General Synod of the Church of England in the Private Member's Bill yesterday? Does it mean that in future the Government will support every decision by the Synod, however daft and damaging it is?

Mr. Pym: No, Sir. The Government view is that since, in 1974, Parliament devolved responsibility for these matters to the General Synod and rearranged the institutional processes by which such decisions are taken, it is not right that Parliament should suddenly, on one aspect, seek to take over responsibility again. Of course, it would be possible for the institutional arrangements to be altered if that were requested and the House so decided. That was the reason for what happened yesterday. It had no connection with the Prayer Book, in which many of us who voted in what I believe to be a constitutional sense believe very deeply indeed.

Mr. Peter Temple-Morris: A few weeks ago my right hon. Friend said that he would endeavour to find time before Easter for a debate on foreign affairs. I appreciate the pressures upon him, but will he try to find

time as soon as possible after Easter for that important debate, in view of the important events that are occurring throughout the world?

Mr. Pym: I wish to find time for that debate after Easter.

Mr. Tony Marlow: Since the confused state in the Lebanon might tempt an imperialistic Israeli Government, faced with an election, to invade that country, linking up with the Phalangist Gemayels in the North—which would put back the cause of Palestinian-Israeli reconciliation by a generation—will my right hon. Friend, as he has done in the past, undertake to arrange a debate on foreign policy in the week after Easter?

Mr. Pym: I cannot guarantee a debate in that week, but I wish to find time for such a debate soon after Easter.

Mr. Nicholas Baker: Is my right hon. Friend aware of the widespread feeling about the divorce laws and their unfair financial provisions? Will he find time for discussion in the House on the Law Commiss ton's recommendations on this important social question?

Mr. Pym: I am aware of the concern. It is an important matter. However, there is the question of time. I hope that there will be an opportunity to debate that important matter.

Mr. James Kilfedder: In view of the many grave social, economic and other problems affecting Northern Ireland, will the Leader of the House set up a Select Committee for the Province, or arrange for the Northern Ireland Committee to meet in Northern Ireland regularly?

Mr. Pym: I have no doubt that that could be considered. However, a variety of views are held about that proposition among hon. Members representing Northern Ireland constituencies and others. More consultation and consideration must take place before any such move is made. However, I note the interest in the topic.

Easter and May Day Adjournment (Debates)

Mr. Speaker: I remind hon. Members that on the motion for the Adjournment of the House on Thursday 16 April up to eight hon. Members may raise with Ministers subjects of their choice. Applications should reach my office by 10 pm on Monday next. A ballot will be held on Tuesday morning and the result will be made known as soon as possible thereafter.

Public Expenditure

Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.

The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move,
That this House takes note of the White Paper on the Government's expenditure plans 1981–82 to 1983–84 (Cmnd. 8175.)
This is the second full expenditure White Paper of this Government and the first with which I have been personally associated. Once again, we published it on Budget day in order to emphasise the link between spending and taxation, and to make clear the general shape of our plans and projections for the economy as a whole.
Yesterday the Treasury and Civil Service Select Committee published its report on the Budget and the White Paper. I am sure that the House will appreciate the efforts that it has made to make this report available to the House in time for this debate. I do not propose to comment on all its points this afternoon but there are certain passages—in particular on nationalised industries and the topical question of current and capital expenditure—on which I intend to comment in my speech.
On public expenditure generally, our broad strategy is unaltered. We are still firmly committed to making significant reductions in the medium term. The pressures of recession and our recognition of its consequences have led to higher spending than originally planned for 1980–81 and will do so again for 1981–82. But we do not accept the argument that in today's conditions the right course is for the Government to abandon totally their previous plans and add still further to the present levels of public spending. It remains the case that in the end public spending can be financed only by the private sector, either through taxation or through borrowing. There simply is no third way.
It is of course argued that by spending more the Government would revive the economy and expand real output, and that the increases in expenditure would create the increased resources required to finance it. Recent British experience just does not confirm that theory. What has actually happened has been that reflations have had a diminishing impact on real output, and turned out to be in reality re-inflations. It has been mainly money income that has risen. The Government's expenditure has had to be financed by the extra burden of taxation and the impoverishment of the saver which inflation brings rather than by a real expansion of output.
We shall not make the mistake of today producing a wildly optimistic assumption about the growth of real resources and then planning expenditure to rise in line with it. It is the excessive burden of taxation and borrowing which we believe is at the heart of Britain's economic difficulties. That is why public expenditure has to be restrained.
If that is our aim, what has been the picture of our first two years of office? In 1979–80 and 1980–81, public expenditure, in volume terms, was 3·½ per cent. lower than the amount planned for each year by the previous Government. This is a major achievement, and was made possible only by taking and implementing difficult

decisions. None the less, in 1980–81, the actual cash expenditure on programmes it now seems, was about £2¼ billion higher than we had provided a year ago.
The recession directly accounts for £1 billion of this excess, through higher expenditure on social security and unemployment benefits and by the redundancy fund. There are other areas of expenditure where the recession has had an indirect impact. For example, the rapid completion of contracts and submission of bills by private sector suppliers, who have had fewer private orders than usual, is a major factor underlying the additional provision for defence of about £470 million Whatever one's views of the pattern that has emerged, it is worth pointing out one important fact. The defence overspend is the only significant case of a failure of control by central Government.
Elsewhere, in some cases, extra expenditure was caused by the implied decision of Government to allow spending on such items as unemployment benefits to continue to increase by, for example, not changing the rules of eligibility or making substantial reductions in levels of benefit. In other cases, the Government more specifically decided to incur extra spending as a result of the recession. For example, we increased the finance available to the nationalised industries in large measure because of the difficult trading conditions resulting from the recession. Both of those categories of decision were in my view, in the circumstances, wholly justifiable.

Mr. Richard Wainwright: rose—

Mr. Brittan: I should like to develop this part of my speech a little further before giving way.
For the coming year 1981–82, and the years beyond, we planned last year a large reduction in total public expenditure. Since then we have taken further policy decisions which will reduce planned expenditure. First, we successfully negotiated a major reduction in our net contribution to the European Community budget. Secondly, the Chancellor of the Exchequer announced on 24 November 1980 further reductions in expenditure for 1981–82 of almost £1½billion in cash.
But, as the House knows, the effect of these reductions on spending for 1981–82 and beyond has been overlaid by the unavoidable consequences of the recession having a different character than expected—falling more heavily on manufacturing industry and employment. For 1981–82, as for 1980–81, we have deliberately decided to make certain increases in spending—for example, extra support for industry and employment—as a response to the effects of the recession on the economy.
Nevertheless, the recent White Paper shows that we are planning a level of expenditure in 1981–82 almost 5 per cent. lower in volume terms than that planned for by the Labour Government.
After this coming year, our decisions for future public expenditure are designed to ensure that the volume of spending actually falls. The White Paper shows a planned fall in real terms by 1983–84 of 4 per cent. compared with current levels. We have also made it clear that we shall be looking hard at the possibility of further reductions in those plans.

Mr. Wainwright: Speaking of the control of public expenditure, the right hon. and learned Gentleman gave


the House figures for last year in cash terms and in volume terms. Will he complete the picture by giving the figures in terms of cost?

Mr. Brittan: I cannot conveniently do so in response to an intervention. As the hon. Gentleman knows, some figures have been made available in relation to cost. I shall be happy to make them generally available. There is no mystery on that point.

Mr. Jack Straw: rose—

Mr. Brittan: I should like to proceed with my speech. The hon. Gentleman may care to intervene later.

Mr. Straw: On this point—

Mr. Brittan: I should like to proceed. I should like to continue to look at the question of future expenditure and future plans.
Some will argue that the increases that I have been talking about in 1980–81 and 1981–82 cast doubt on our plans for later years. The Treasury and Civil Service Select Committee, for example, in the report to which I have referred, described the figures for the nationalised industries as "optimistic". The answer to this charge lies in the explanation which I have already outlined for the overspend in 1980–81. That overspend was, by and large, not a failure of control. It was a failure to estimate correctly the extent and the increase in the costs of certain demand-determined programmes.
We are much more cautious now in our working assumptions than we were a year ago. For example, we have substantially reduced our provision for shortfall on expenditure—by £340 million a year in 1980 survey prices—and we have rephased the expected improvement in the financing of the nationalised industries to take account of the continuing effects of the recession. Moreover, the contingency reserve provides an extra cushion against underestimates of spending. In the case of the plans for the nationalised industries, on which there are particular uncertainties and difficulties, substantial additional provision in 1980–81 was successfully accommodated within the contingency reserve without any effect on the planned total of expenditure. We have provided a substantially higher contingency reserve in the later years to guard against the need to increase individual programmes beyond the present plans. I shall illustrate it. The contingency reserve in the later years is about one-third higher in real terms than this year's.
The House will, I know, be concerned about the distribution of expenditure as well as its total. We are planning for a downward rather than an upward trend in total expenditure. We also have a different order of priorities within the total.
It is not always recognised what a very large proportion of total public expenditure is accounted for by a few major programmes. Social security, consisting of pensions and other benefits paid out to millions of people, constitutes over one-quarter of the total. Three other programmes on which we are deliberately aiming to increase expenditure are health, defence, and law and order.

Mr. Straw: rose—

Mr. Frank Allaun: rose—

Mr. Brittan: I should like to explain the pattern of expenditure. It might be convenient to the House if this

were taken as a block. I am now explaining the distribution of expenditure within the total. I believe that this matter is of considerable interest.
I was saying that social security, consisting of pensions and other benefits paid out to millions of people, constitutes over one-quarter of the total. Three other programmes on which we are deliberately aiming to increase expenditure are health, defence, and law and order. These together account for more than a further quarter of the total. This means that about 60 per cent. of total expenditure is accounted for by programmes that are increasing even though the programmes themselves have had to contribute some savings to counterbalance increases on our previous plans.

Mr. Bob Cryer: During his discourse on the distribution will the Minister explain how the Government will cope with the problem of increasing unemployment pay, which contributes so much to the increased public sector borrowing requirement, without reducing the number of people who are unemployed? The Government do not seem to have any plans for bringing about such a reduction. If that is so, the PSBR will inevitably increase.

Mr. Brittan: The figures both for last year and for this year take account of the extra expenditure needed for precisely the reason the hon. Gentleman has given. The way to deal with the unemployment problem is through the Government's economic strategy and policy as a whole. The best way of securing a long-term reduction in the level of unemployment which vie all seek is to make a success of the Government's economic strategy, which puts at the forefront success in the battle against inflation. I believe that inflation is the cause of unemployment rather than the reverse.

Mr. Straw: The Chief Secretary made a breathtaking statement at the beginning of his speech, because he made a virtue out of the fact that the Government had not reduced the rules of eligibility for unemployment benefit or cut its real level. I assume that he means that they had not cut its real level beyond the 5 per cent. cut which they have already made. Does that statement mean that both a change in the rules of eligibility and a cut in the real level of unemployment benefit were seriously contemplated?

Mr. Brittan: It means nothing of the kind. At that stage in my speech I was seeking to explain what has happened to public expenditure. I said that the increase over what had been planned was caused by two decisions, one express and the other implied. I gave examples of the express decision. The implied decision was the decision not to make the change. The very fact that I described it as implied indicates that there was no such consideration. The hon. Gentleman, with the intellectual rigour to 'which I know he aspires, will agree that I would have been less complete in my account of what had happened had I not given that explanation. He reads too much into it.

Mr. Allaun: rose—

Mr. John Bruce-Gardyne: rose—

Mr. Brittan: I ought to proceed. I shall give way later. Some points have been raised with which I know the House would wish me to deal.

Mr. Bruce-Gardyne: I apologise to my right hon. and learned Friend for intervening. He referred to the increase


in defence expenditure provision in the White Paper, which is entirely consistent with the policy on which the Government were elected. Will the substantial overspend in the cash limits on the defence budget in the 1980–81 White Paper be recouped in the forthcoming year?

Mr. Brittan: At this stage I am not in a position to inform the House precisely how that will be dealt with in the coming year.

Mr. Allaun: rose—

Mr. Brittan: I shall not give way. I must proceed. I have given way several times to Labour Members, and I know that the House wishes me to deal with some of the points that were raised by the Select Committee.

Mr. Allaun: On a point of order, Mf. Deputy Speaker. The right hon. and learned Gentleman suggested that if I waited a minute he would give way. He then refused to give way to me, but gave way to one of his hon. Friends. I take it—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. That is not a promising start to a point of order.

Mr. Brittan: The score is three to one. If the hon. Gentleman bears with me, he may improve it.
I was explaining the areas of public expenditure in which there had been increases. I was about to say that the large size of those programmes means that if the total of public expenditure is to fall we must make very large cuts in the remaining two-fifths of expenditure. In fact, the cuts must largely fall on four other main expenditure programmes, accounting for about one-quarter of public expenditure—housing, education, support for industry and employment, and finance for the nationalised industries. The last two programmes have increased while the recession lasts, but we plan large reductions in them over the medium term, and it is right to do so.

Mrs. Elaine Kellett-Bowman: Will my right hon. and learned Friend give way?

Mr. Brittan: Perhaps my hon. Friend will bear with me while I proceed a little further.
A recent complaint is that almost 90 per cent. of public expenditure consists of administration. If that were so it would be much easier to cut it. But that is simply not the case.
I draw the attention of the House to table 1.8 of the recent White Paper. It shows that, indeed, current expenditure as defined there accounts for almost 90 per cent. of the total. But one-third of this consists of current grants to persons—that is, the actual pensions, child benefit, unemployment benefit and other benefits paid out to various beneficiaries—and that actually excludes the administrative costs of those benefits. Another fifth consists of the procurement of goods and services supplied by the private sector, much of it for defence. Another tenth comprises other kinds of grants and subsidies. Only one-third of the total of current expenditure—that is, less than a third of total public expenditure—consists of the wages and salaries of people employed in central Government and local government. The cost of those wages and salaries is a source of major and legitimate concern, but I should point out that the numbers employed are falling.
We have already reduced the Civil Service by 5 per cent. since we came to office, from 732,000 to 695,000

and we plan to reduce it further to 630,000 by 1984 making it the smallest Civil Service since the war. The cuts so far achieved yield annual savings in administrative costs of about £350 million in cash.
None the less, between 1978–79 and 1980–81 the public service pay bill rose by about 50 per cent., or £10 billion. The 6 per cent. provision for pay increases in the 1981–82 cash limits should be seen against that background. The taxpayers' purse is simply not bottomless, and I think that many public service employees themselves recognise that after such large increases, and when their job security is taken into account, moderation on their part can reasonably be expected by the community as a whole.

Mr. Frank Allaun: The right hon. and learned Gentleman has talked about cuts in housing and an increase in defence. He has not said that housing is being cut by 51 per cent., whereas so-called defence expenditure is being increased by between 3 and 5 per cent. in real terms each year for five years. Does he not think that that is utterly anti-social?

Mr. Brittan: I do not share the hon. Gentleman's public expenditure priorities. He has not taken into account what has happened in relation to heavy spending on housing in previous years or the nature of previous spending on defence. From the outset, the Government have made their spending priorities quite clear. I think that they command the support of the majority of the people in the country. They were put to the electorate fairly and squarely in the 1979 general election, and the electorate voted for them.

Mr. John Townend: Will my right hon. and learned Friend give way?

Mr. Brittan: I hope that my hon. Friend will forgive me, but I want to refer to the proportion of capital expenditure in the total of public expenditure. The contrast is often drawn between expendable current expenditure which should be cut further and virtuous capital expenditure for which more funds should be found.
The Treasury and Civil Service Select Committee and others have pointed to the desirability of reversing the decline in capital spending relative to current expenditure. To some degree, I share that concern. But, leaving aside the comparative ease of making the cuts, the balance is by no means so one-sided. Cuts in current expenditure can involve a real cost in terms of services provided by the public sector, and capital expenditure does not necessarily provide benefits that outweigh that cost. A careful consideration of expenditure priorities both between programmes and then within any one programme will show that there may sometimes be good reasons for not increasing the proportion of capital expenditure.
As a Government, the policy priorities that we have, and should have, are between the various functional programmes such as health, education and transport, and not between the technical categories of expenditure such as non-pay current expenditure on goods and services and gross domestic fixed capital formation. It would be quite wrong to start at the other end with a decision to spend more on some particular statistical category of expenditure and then passively to allow functional programmes to expand or decline accordingly.
It so happens that the four main programmes to which the Government attach priority, and to which I referred


earlier, have a low capital expenditure content. Police, pensions for the elderly, nurses, even defence equipment, all count as current expenditure. Social security and defence expenditure have one thing in common; they have a negligible capital content.
That does not mean that the distinction between capital and current expenditure is of no relevance at all; still less that information on it should not be clearly provided. It certainly should. A substantial amount of information is provided at the moment. The annual Financial Statement and Budget Report contains tables which divide public sector receipts and the expenditure of general Government, nationalised industries and other public corporations into current and capital categories. At the end of each Vote we provide an analysis of its public expenditure component into its current and capital elements. Table 5 of the Chief Secretary's memorandum summarises this information.
Last, but not least, the public expenditure White Paper analyses public expenditure in this way in tables 1.8, 3.2 and 4.5. None the less, we are now considering carefully whether the distinction between capital and current expenditure should be given greater prominence and should play a greater role in the presentation and determination of our spending plans. I think that there is a good case for its doing so.
To some extent, the concern about the balance between capital and current expenditure in the public sector arises from a mistaken analogy with the use of the same distinction in commercial accounting. By separately indentifying capital assets and depreciating them over their useful life, private sector companies obtain a fair measure of a capital element in their annual costs which can be set against the flow of benefits from their investment. But, with the major exception of nationalised industries, which I shall be dealing with specifically later, the public sector's investments are not revenue-earning in this way. The Thames tidal barrier and school buildings do not generate income in the way that oil rigs or factories do.
Consequently, applying this distinction to the public sector can be misleading because the purpose of the public sector is not to generate revenue from assets but to provide special services for the public. Both capital and current expenditure serve this one purpose. There is no particular reason, for example, why hospital building should always be a better way of improving health care than employing more nurses.

Mrs. Kellett-Bowman: Does my right hon. and learned Friend agree that while many public services do not generate income, universities do'? When he drew up his plans for expenditure on higher education—page 106—did he take into account the very severe drop in applications which would occur'? For example, in my own University of Lancaster there are 42 per cent. fewer applications this year than last. These people generate income. Would it not be better to make it possible for these overseas students to continue to come here and generate income by making more generous provision in this sector?

Mr. Brittan: I am not persuaded that they are generating income. I think that the pattern of spending prescribed in that area is entirely justified.

Mr. Joel Barnett: Is the right hon. and learned Gentleman arguing seriously that in the new idea which he has put forward of dividing capital

expenditure from current expenditure he will consider capital expenditure on the basis of whether it is revenue-earning?

Mr. Brittan: No, I was not saying that. I was trying to point out the conflict between capital spending and investment in the private sector.
I ended by pointing out by way of example that there was no particular reason why hospital building should always be a better way of improving health care than employing more nurses. We all know that hospitals have been built where there is not the staff to run them. But I am absolutely sure—this has been the cause of much of the criticism—that capital spending should not take the lion's share of cuts simply because it is the easy option. That is a quite different matter and can, and indeed does, happen all too easily. I shall tell the House when it happened so easily.
Between 1975–76 and 1978–79 public capital spending fell by over one-third—or £6 billion in 1980 survey prices—while current spending rose by over £3 billion. Nationalised industry investment, of which vv e hear so much, did not escape its share in those years; it fell by £700 million. What an easy option it was for the right hon. Member for Leeds, East (Mr. Healey) to take—and the right hon. Member for Stepney and Poplar (Mr. Shore), too, whose actions then as Secretary of State for the Environment were absoliutely central to the massive onslaught on our national infrastructure. [Interruption.] I am reminded that the right hon. Member for Heywood and Royton (Mr. Barnett) had his share in this as well.
I am glad to say that we are not following that path. The fall in capital expenditure has been much smaller—a decline of about £1½billion in 1980 survey prices between 1978–79 and 1981–82. Moreover, this is taking place in areas in which in some cases the need for major new investments is less than it used to be.
There are capital-intensive programmes where the economic case for high levels of capital expenditure is less powerful than it was. The road building boom of the late 1960s and early 1970s has provided us with an extensive network of motorways and trunk roads. We have therefore stabilised capital expenditure on roads and allocated more resources to motorway renewal, which, as it happens, does not count as capital expenditure.
Within programmes, too, current expenditure can be more important in enabling us to provide the services which the public expects from capital expenditure. As an example from the education programme, the school population is falling rapidly and there is less need for a major programme of school building. But what is of much greater importance is the provision of school textbooks and related equipment, which counts as current expenditure. Our plans allow for a 2 per cent. increase in real terms each year from 1981–82 in the provision of books and equipment per pupil.

Mr. Donald Anderson: Would the right hon. and learned Gentleman apply those same tests to the housing programme in terms of new building and the maintenance of the existing supply?

Mr. Brittan: I am not sure that I have enunciated a test that is capable of application in that way. I merely illustrated what had happened and pointed out that the advantages and disadvantages are not necessarily in every case as has sometimes been suggested.
The main argument currently put forward in favour of increased public expenditure, however, relates to the nationalised industries. The Treasury and Civil Service Select Committee referred to this matter with tantalising brevity. Its thesis seems to be that public sector investment, particularly by the nationalised industries, should be increased, because in the short run it would give additional business to private industry and in the longer run it would add to the economy's productive potential.
The Treasury and Civil Service Select Committee is not alone in failing to make absolutely clear whether such investment should be allowed to increase the totals of public sector spending and borrowing or whether they should be accommodated within the existing totals by cutting back other public spending. But this distinction is a crucial one. This is where hard choices and hard decisions have to be made. Whatever the medium-term benefits, in the short term every pound of additional public investment has much the same effect as a pound of public expenditure on current goods and services.

Mr. Tim Eggar: Is not my right hon. and learned Friend aware that the Conservative Members on the Treasury and Civil Service Select Committee made it clear that in their view any increase in capital expenditure should be at the expense of a reduction in current expenditure?

Mr. Brittan: I am glad that I gave my hon. Friend the opportunity to make that point clear. I welcome that clarification. I was about to say that if the additional public investment—contrary to the views of Conservative Members on the Select Committee—were allowed to add to the borrowing requirement, it would tend to raise interest rates and discourage other items of expenditure, including some private sector investment.
Nor, I am afraid, can this problem be avoided by redrawing the statistical boundaries of the public sector. As the Chancellor of the Exchequer put it so clearly to the Treasury and Civil Service Select Committee the other day, one does not alter the real world simply by shifting around the definitional furniture. This is not to say that the present definitions of public expenditure and the public sector are inevitably perfect. I have been at the Treasury for too short a time to be persuaded that that is so. There is always a case for looking critically at definitions to make sure they reasonably reflect present realities. But the problems of financing the nationalised industries are ones of substance, not of definition. As long as the bodies doing the investment are publicly controlled, their borrowing in any meaningful sense must be borrowing by the public sector.
It is sometimes said, in effect, that if the Government cannot finance the investment the City can. The distinction that this argument seeks to draw is not meaningful. The Government have no surplus funds of their own; on the contrary, they have a large borrowing requirement. They finance that requirement mainly by borrowing from the City. All that is in question here is whether the City provides the finance directly to the public corporations or to the Government, who then lend the money on to the corporations. Either way, that borrowing is part of public borrowing.
In certain circumstances there may be some advantages in direct financing for the corporations that outweigh the

disadvantages. I shall return to those in a moment. But the essential point is that there is no magic by which changing the channels of financing will enable additional public investment and borrowing to be financed without additional pressure on interest rates or money supply.
The only effective way in which these financial pressures could be avoided would be to ensure that the new investment was not an addition to public spending but was in place of some other spending already planned. But that raises the question of what other spending should be cut, and whether, if such reductions could be achieved, they should be used to reduce the level of total spending rather than to change the balance of different programmes within it.
One must beware of jumping to too many general conclusions on nationalised industry investment. One would think from many recent remarks that there had been a massive slump in investment by public corporations. We are in fact providing for substantial increases in nationalised industry spending on fixed assets—up from a little over £4½ billion in each of the years 1977–78 to 1980–81, to about £5·2 billion a year for the next three years—and that is excluding any provision for capital spending by the British Steel Corporation. It may be of interest that British Telecom is planned to be the biggest beneficiary of this increase, with—in 1980 survey prices—about £300 million a year more in 1981–82 to 1983–84 than over the three years just ending—an increase of some 25 per cent. between the last three years and the remainder of the period covered by the White Paper on public expenditure.
Hon. Members who are concerned about this issue should therefore note that it is the Labour Government who should be the proper targets of their criticism, and that in circumstances of much more acute financial stringency, we are already giving much more effective priority to capital spending, particularly in the nationalised industries.

Mr. Nigel Forman: In his recent remarks my right hon. and learned Friend has demonstrated his refreshingly open mind on these matters and the fact that he is prepared to consider them dispassionately. Will he give an assurance that he will give due consideration to what happens in France? I understand that quite a bit of nationalised industry borrowing does not count against the general Government borrowing requirement. Might not the Treasury examine that?

Mr. Brittan: I assure my hon. Friend that we are considering the French experience. Indeed, Treasury officials recently visited France.
The uncomfortable truth is that the rate of return on much of those industries' investment has been appallingly low. In many cases this reflects a failure to control current costs with the same efficiency that most private sector companies have to enforce. This in turn is often the reason why nationalised industries have to cut their investment programme for lack of finance. Just 2 per cent. off the pay bill of the nationalised industries would release £250 million for investment. Although there is a wide scatter of pay settlements in the nationalised industries, some of them have settled in this round for as much as 12 to 13 per cent. Moreover, a saving of only 1 per cent. of the total current costs of nationalised industries would yield £300 million.
The ability of the nationalised industries to invest is therefore inextricably bound up with the whole question of pay and productivity within them. If they controlled their costs more, this would both raise the rate of return on investment and help provide the finance for it.
If there are now several projects with the prospect of offering good rates of return, I hope that it will prove possible to accommodate them within the present totality of the nationalised industries' external financing limits. Indeed, all the criteria applied to public investment are designed to favour projects showing high prospective rates of return. The real trouble, I suspect, is that such projects are rarer than is sometimes suggested.
None the less, as the Chancellor of the Exchequer indicated in his winding-up speech in the Budget debate and in the evidence that he gave to the Select Committee, we are still giving considerable thought to these matters and we are ready, among other things, to consider alternative methods of financing nationalised industries.
There are at least two criteria which any new financing arrangement would have to meet. First, it should introduce a market discipline for the management of the industries concerned. It should also tap new sources of finance and avoid adverse effects on interest rates and so private industry. I am afraid that so far it seems to me that methods of financing which meet those criteria have yet to be found, but I assure hon. Members that the Government themselves are as anxious as anyone to find them, and we shall continue to look actively for them.

Dr. Jeremy Bray: I am glad that the Treasury has an open mind on these matters. Indeed, I hope that the Treasury and Civil Service Select Committee will pursue them. The right hon. and learned Gentleman's justification of the general attitude towards capital expenditure would seem to be that because the Labour Government made cuts the Conservative Government can do so. May I refer him to the capital expenditure cuts in the construction industry? Since 1975–76 there has been a 35 per cent. cut in construction work in the public sector. The Labour Government are responsible for half of that cut, but this Government are responsible for a further 17 per cent. cut despite the fact that the capital stock of houses, roads and sewers has deteriorated.

Mr. Brittan: I was not putting forward the argument that the hon. Gentleman has put in my mouth. I was merely saying that what the Government are doing compares very favourably with the actions of the Labour Government. By implication, I said that although some may have the right to call for higher capital spending those who supported or were members of a Government who, between 1975–76 and 1978–79, achieved the outcome that I have described are the last people in the world to have any right to expect to be heard with respect on this subject.
I come now to the other main issue arising from the White Paper, namely, the switch to cash planning. My right hon. and learned Friend the Chancellor referred in his Budget Statement to the changes that we are making in the way in which we propose to take spending decisions, so that cash rather than volume is given primacy. When I was at the Home Office I always felt strongly how absurd it was to plan in the funny money described in the jargon as survey prices. I therefore very much welcomed the

opportunity of helping to make the changes that have been announced—changes that are as radical as any in the past decade.
The cash limits system introduced by the previous Government was the first recognition that cash counted as well as volume. It has meant that as far as it extends in the current year—that is the one in which spending actually occurs—cash and not volume has been paramount. That was an important advance, and I am happy to pay tribute to those responsible for it. In the area covered by cash limits the Treasury has no longer had to provide art open cheque. To that extent it has given an incentive to managers to cut their costs.
We have made one immediate further change. We are publishing for the first time in the White Paper, alongside the volume plans, cash figures for expenditure on each programme in 1981–82 and also the cash limits.
The cash limits represent the cash that can be afforded for the services in question. If costs rise more than provided for, services are bound to suffer. The message to firms is that price increases will inevitably reduce the work available. They cannot expect a given volume of work and at the same time to impose any price increase that they consider appropriate. The Government cannot and will not be a soft touch for suppliers and contractors. The message for public service pay negotiators, who are responsible for over 30 per cent. of public expenditure, is that their negotiations on pay have implications for jobs and services.
We are also taking a further step to strengthen the cash limits system. The presumption is, and remains, that cash limits once set will not be changed, but experience shows that occasionally some adjustment is inescapable. In the past, if a proposed increase arose simply because of higher prices or pay it was not a charge on the reserve. It added to the PSBR. It amounted to a charge on the reserve only if it involved a decisions to increase the volume.
From now on increases in a cash limit, whether because of decisions to vary the volume or to make an adjustment for special reasons for pay and prices, will be charged to the contingency reserve. So there will now be a tighter constraint on changes in cash limits during the year. For example, the increase of £200 million in the defence cash limit for 1980–81 was not charged to the contingency reserve, because it was designed to cope with the extra cost of the Armed Forces pay increase and the rising cost of the defence equipment programme. The consequences for improved expenditure control of a fixed limit on such increases are easy to see.
In addition, as indicated in the White Paper, we shall continue to look at the possibility of extending the cash limit system to some areas at present not covered by it. I am not persuaded that every non-cash limited programme is so demand-determined, or in some other way so out of our reach that cash limits cannot be extended to it.
I turn to the major change we are to make in our planning system. Cash limits, important as they are, are only a means of controlling expenditure over part of the field once the spending decisions have been taken. They are the red lights which control the traffic when it is already on the road. But we must also change the framework within which the decisions are taken. We must get away at that stage from funny money and enable proper account to be taken of the cash required to finance what we decide to do.
It remains as vital as ever that decisions about particular items of spending should be taken in relation to the prospects of total public expenditure. But that does not, in my view, imply the need to plan in funny money—that is to use throughout the annual cycle of official analysis, of ministerial discussion and decision, and the White Paper, the prices of the autumn before that cycle even started.
We shall be changing the system so that cash figures are used as a basis for Ministers to take their decisions on expenditure. That is, in the 1981 public expenditure survey the figures for at least the focal year, 1982–83, will be in cash. With regard to the later years of the survey we are still considering whether decisions should be taken in cash or in the prices that are expected to rule in 1982–83.
I see two major advantages in this change to the public expenditure survey system. First, it means that at least for the coming year, public expenditure will be planned in the language that matters. Ministers will be talking about the cash that will actually be spent, and, therefore, the amounts of expenditure that will have to be financed by taxation or borrowing.
Secondly, this reform should bring home to managers that there cannot be any commitment to particular levels of volume provisions stretching away into the future. I accept that those responsible for individual programmes must have as one element in their forward planning the volume of the service that they wish to provide. But this should not be the only element. Hitherto managers have been assured, or have believed they ought to be assured, of their future plans in volume terms. It was assumed that except for the restraint imposed by cash limits in the current year the burden of adjustment for any unexpected price increases would fall on taxpayers and the private sector rather than on the spending programmes themselves. This attitude will now have to change. The presumption will now shift in favour of maintaining planned cash expenditure, rather than a given volume of provision regardless of cost. This will give a strong incentive to use the cash sensibly.
Governments have inevitably suffered from living in the artificial world of volume planning, which ignores the fact that some programmes become more expensive than others. Most businesses, whether they be multinational companies or corner shops, and most households tend to shift their patterns of buying when prices change. The Government should not have a system which obscures the need to do so. The new system will show clearly the full effects of such changes between programmes.
I do not think for one moment that the important changes that we are now making in the planning system will in themselves make the decisions about future policies easier, or will make reductions in public expenditure any more palatable to those who are directly affected, but they will at least help Ministers to take those decisions by letting them see the consequences clearly. They will change the ethos, helping to ensure that spending decisions are better related to the resources from which they have to be financed. To do that remains, as it has been for many years, a fundamental priority for the British economy.
In November 1979 this Government's first White Paper on public spending stated:
To limit severely the resources devoted to our public services for the time being is not to deny that many of them need improvement. It is rather to recognise that the only way in which

that improvement can be secured is to earn the money and resources by higher output … To plan more public expenditure before the required output is available to support it would ensure that, in the event, that growth of output does not take place.
Those words remain every bit as true today, and it is in that spirit that I commend the White Paper to the House.

Mr. Peter Shore: I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
rejects the White Paper on the Government's Expenditure Plans 1981–82 to 1983–84, Cmnd. 8175, because it will increase unemployment, raise the cost of living, reduce public investment, damage public services both locally and nationally and because it reflects the erroneous belief that public expenditure is itself the principal cause of Britain's economic difficulties".
This is an appalling White Paper. It is appalling because of the perverse priorities that it embodies, because of the further reductions in vital community services that it will enforce, and, above all, because of its refusal to use the power of public expenditure to help alleviate the misery of growing unemployment and to counter the continued economic decline of our country.
The salient and most worrying feature of the White Paper is that it is placed within the context of a planned decline in national income and output. As yesterday's timely report of the Select Committee on the Treasury and Civil Service brought out, the fiscal deflation of the measures announced in the Budget and last November total nearly £5 billion this year. The Select Committee was right to examine and challenge the extraordinary assertion of the Treasury team that this Budget is not deflationary—in particular, the absurd claim of the Financial Secretary that because the target growth of the money supply this year is broadly in line with the expected rate of inflation, that in itself will have a marginally reflationary effect on the economy as a whole.
Leaving aside the point that money supply has hitherto always been claimed to have not an immediate but a lagged effect on output and inflation, how can the Financial Secretary argue that the Budget measures will have no contractionary fiscal impact upon the economy?

The Financial Secretary to the Treasury (Mr. Nigel Lawson): I shall deal with that matter when I wind up.

Mr. Shore: We await with interest the explanation that the Financial Secretary has volunteered to give us later. How does he explain the downward revision in the Treasury evidence from 1 per cent. to ½ per cent. GDP growth in the first half of 1982, knowing that virtually all of that will come from increased North Sea gas and oil?
It is surely incontrovertible that by the end of 1980, before this new financial year began, GDP—output data of Britain—had fallen by no less than 7 per cent. since the second quarter of 1979—a period which covers the responsibility of this Government—and this year's Red Book anticipates a further fall of 2 per cent. during 1981. Although the current White Paper covers the longer period of 1981–82 to 1983–84, it contains no forecast of GDP during the survey period.
It is instructive, therefore, to look again at the White Paper on Government expenditure that was issued in January 1979 by the Labour Government. Our plan was for a modest expansion of public expenditure—an increase of about 2 per cent. a year. However, that was placed


within the context of estimates of GDP ranging from a growth of 3 per cent. to a growth of 2 per cent. per annum. Total public expenditure would have increased by about £3 billion during the past two years, and would be running, at today's prices, at about £83·5 billion. If GDP growth, at the lower end of the range, had been sustained at 2 per cent., that enlarged public expenditure would have claimed between 41 per cent. and 42 per cent. of GDP.
It is, of course, through an expansion of GDP that we have been able, almost throughout the post-war period, under different Governments, to finance a rising total of public expenditure without imposing insupportable burdens on total resources or on the taxpayer.

Mr. Bruce-Gardyne: The right hon. Gentleman mentioned the projections of GDP growth in the Labour Government's White Paper. Will he accept that even the lower range predicted was out of kilter with the experience of the previous Government? Is it not time to recognise the folly of predicting— as his Government and previous Conservative Governments did— rates of growth in GDP which are never fulfilled as a justification for increases in public expenditure which most certainly were fulfilled and which the economy could not sustain?

Mr. Shore: I disagree with the hon. Member. One cannot plan public expenditure in a rational manner unless one takes a view, however preliminary or subject to correction, on the growth of GDP. If one says "It is black as night and I do not know where I am going", what use is there in even publishing a public expenditure White Paper covering three years? As for the reality of our expectation of a minimum 2 per cent. growth if we had won the general election, I remind the hon. Gentleman that we had achieved 3 per cent. growth in our final year and that for the first time North Sea oil was coming in at full flood.
The difference between what has happened under this Government and what did not happen under the Labour Government is the difference on the balance of payments of £6 billion in North Sea oil and gas, which has been squandered because of the incompetence of this Government.
The Government, pledged as they were to change the fortunes of Britain and break with the post-war trend, have succeeded in doing just that. During the past two years they have turned slow and at times nil growth and relative decline into an absolute decline. I doubt whether any country in the Western world, at any time in this century, has experienced in a three-year period such a massive decline of its national wealth and output as Britain will have experienced by the end of this financial year under the bold new policies of the Prime Minister and her Chancellor.

Mr. Forman: I refer the right hon. Gentleman back to his somewhat hyperbolic comments a few moments ago. Is it not a fact that the compound rate of growth in the five and a half years of Labour Government was about 1 per cent. in real terms, and that, with the exception of the final pre-election spurt, engineered by himself and his right hon. Friends, there was no realistic basis for the sort of public expenditure projections that he and his right hon. Friends made?

Mr. Shore: When we came to power in 1974, the result of the fourfold increase in oil prices was equivalent to a

transfer of 3·5 per cent. of our total GDP to countries basically in the Arab world. We began with a minus 3 per cent. and the most formidable balance of payments crisis in our history. We gradually overcame that difficulty and developed North sea oil in the most remarkable way. By the end of our period in office we were ready to enjoy for the first time the benefits of oil self-sufficiency.

Mr. Eggar: Will the right hon. Gentleman give way?

Mr. Shore: We should be ashamed that although we are the only country in the Western world that has become self-sufficient in energy in a period of scarce and high-priced energy we have the worst economic performance of all.

Mr. Eggar: Will the right hon. Gentleman give way?

Mr. Deputy Speaker: Order. ther hon. Gentleman knows perfectly well that if the Opposition spokesman does not give way the hon. Gentleman must resume his seat.

Mr. Shore: The implications for public expenditure of a declining national output are obvious. First, in spite of massive cuts in important and vital community services and in public industries, the proportion of the GDP taken by public expenditure has actually increased.
In 1980–81, public expenditure rose from 41½ per cent. to 44½ per cent. of GDP. Taking account of the impact of the most recent cuts in public expenditure, the Government according to the White Paper, do not expect that that share will fall in the coming year by more than 1 per cent.—and that figure excludes debt interest. I shall be surprised if public expenditure claims a lower share of the GDP this year than in 1980–81.
That is not the only effect of the Government's pursuit of a minus growth policy. The composition of public expenditure has already substantially changed, as the Chief Secretary made clear, from expenditure on public services and public investment to the maintenance of a growing army of unemployed and subsidy of essential public industries. As the White Paper admits, the self-induced recession has
exerted upward pressure, for example on unemployment benefit and special employment measures.
In the current financial year social security payments are due to rise by £884 million over the provision made last year and by a further £1,700 million in 1982–83. The great bulk of that reflects increases in the direct expenditure costs of increased unemployment. There has also had to be a great increase in expenditure on employment measures and industrial support—both recession-induced.
Under the general heading
Industry, energy, trade and employment
in table 1.11 in the current White Paper, Government expenditure increased by £600 million last year and will rise to £1,276 million in 1981–82 and by £900 million in the following year.
Of course, there have been real cuts too. As my hon. Friends pointed out earlier, housing expenditure fell by nearly £700 million last year and will fall by a further £1,100 million in 1981–82. Education spending was down by more than £300 million in 1980–81 and will be reduced by another £360 million in 1981–82. In the past two years local authorities have suffered a total cut of £2,500 million—about 12½ per cent. of their total income.
The net result of a totally misconceived economic policy—a policy of minus growth—is not a swift and


radical reduction in public expenditure as a whole but a reduction that falls far short of the Government's intentions and hits major services and investment in order to release public funds to keep more and more people in idleness and to prevent the collapse of basic industries.
The short table on page 2 of the White Paper brings out all that. Last year, in their innocence—if that is the right word—the Government planned to cut public expenditure by £4·3 billion from the plans of the previous Labour Government. They further proposed to cut it in 1981–82 by £6·6 billion and next year by £9·7 billion over the programmes that the previous Government had planned.
The reality has turned out to be different. Far more modest, though still very damaging, reductions are now forecast for the next two years. The Government have yet to realise not only that important, indeed vital, public services suffer from those cuts, but that the cuts actually contribute to the collapse of production and the continuing decline of GDP. After all, 25 per cent. of total Government expenditure goes on the purchase of goods and services, the range of which was outlined by the Chief Secretary. Those purchases are overwhelmingly from firms in the private sector.
Capital investment, as shown in the figures for gross domestic capital formation in table 1.8 of the White Paper, has fallen from just over £7,000 million per annum in 1978–79—a figure that was far too low, according to the Conservatives in Opposition—to £5,392 million in 1981, and it will fall yet again in 1981–82 to £4,637 million. That is a fall in three years of about one-third from a figure that the Conservatives complained about when they were in Opposition. Nearly all the expenditure under that heading provides employment and payment for firms in the private sector.
In his Budget Statement the Chancellor of the Exchequer had little to say about public expenditure, at least in the current financial year. However, he gave some indication of his future intentions:
Our decisions for the future are designed to ensure that the volume of spending falls after 1981–82. The public expenditure White Paper shows a planned fall of 4 per cent. by 1983–84. Whether we can spend even on that scale must depend on how far we can afford to do so. During the annual review later this year we shall be looking hard at the possibility of further reductions in those plans."—[Official Report, 10 March 1981; Vol 1000, c. 767.]
Those words were basically reiterated by the Chief Secretary in opening this debate. What a prospect that 4 per cent. threat presents for public expenditure and national and local services.
Have we any reason to believe that there will be a recovery from the recession in the years ahead? Do the Government seriously believe that the public expenditure totals will not be inflated yet again by their having to increase counter-recession expenditure, whether on unemployment benefits or on rescue operations for firms and job maintenance?
The Chief Secretary and his team have learnt nothing from the bitter experience of the past two years. They are determined to go on cutting public expenditure as part of the medium-term financial strategy announced 12 months ago, a key element of which is a reduction in public expenditure.
Once again we have to ask the basic question: why have the Government committed themselves to such an

evidently damaging policy course? There is no doubt that we have vast unused capacity in Britain, and there is no evidence of any anticipation of claims upon that capacity arising from any other sector of the British economy, including our exporters.
There is also no evidence to suggest that public expenditure in Britain is out of line with that of our major industrial competitors. The latest EEC figures show, as they have shown in previous years, that the United Kingdom is substantially below the EEC average and is below its three main industrial competitors—Germany, France and Italy—in terms of public expenditure as a percentage of GDP. In addition, the Financial Secretary and the House are well aware that the British are well down the international taxation league table. There is obviously no connection between Britain's general economic performance and the level of our public expenditure and the taxation measures that we need to take to finance it.
In Opposition the Prime Minister and her colleagues argued that too much public expenditure went on current spending and too little on capital projects. That is an arguable proposition, and I thought that the Chief Secretary was dealing with that when he discussed the rival claims of public current and capital spending. But the Government must surely understand that the effects of their policies have been most severe precisely on the capital programmes of public authorities.
What is the justification for continuing the assault on public expenditure? As far as I can see it is still the stale old argument of last year and the year before, that the Government believe that the public sector borrowing requirement is much too high and that a large PSBR creates inflation, drives up interest rates and crowds out funds that would otherwise be used by private industry.
I shall put the counter case against these propositions. First, if this year's PSBR, of 4¼ per cent. of GDP is acheived, it will be the lowest that we have had for the past eight years, regardless of the fact that we are in by far the most profound depth of recession since the war. Secondly, there is no evidence that the PSBR leads to inflation. The experience of recent years has shown that public borrowing has been overwhelmingly financed by genuine savings from the non-bank public. Only a small part has been raised from the banks. The use of genuine savings for investment in the public sector is no more inflationary than if the same savings had gone to finance the expansion of private sector companies.

Mr. Anderson: Is not the absurdity of the Government's proposition underlined by the distinction in their privatisation measures, in which 51 per cent. of the Government holding is meant to be within the PSBR and 49 per cent. is not, although there is the same effect on total calls on capital?

Mr. Shore: I absolutely agree with my hon. Friend. It is extraordinary that we have to play with the 1 per cent. to make feasible and possible what we all agree is sensible and worthwhile capital investment because otherwise it would apparently fall within and swell the PSBR.
Does Government borrowing inevitably push up the rate of interest? There is no reason why that should be so unless there is at the same time a great demand for borrowing and expansion arising from the private sector. That clearly is not so now, whatever it may have been in


the past. Far from expanding, the private sector is contracting. That is happening at an appalling rate. Investment is falling. The history of the eight years since the first oil strike and the subsequent enlargement of Government borrowing demonstrates that there is no direct link to be found between the size of Government borrowing in any one year and the rates of interest that Government stock has to carry.
Last year was a classic example of the demonstrable untruth of the claim that the growth of the PSBR inevitably leads to higher MLR and higher interest rates generally. The Government began the previous financial year with a declared target of £8½ billion for the PSBR and with an MLR of no less than 17 per cent. As the year wore on the PSBR grew from £8½ billion in March to about £12 billion in November and to an outturn figure, as we heard a few weeks ago, of no less than £13½ billion. According to the Government's reasoning, the MLR should have risen well beyond the 17 per cent. with which the financial year began. In the event, and in spite of the swollen PSBR, interest rates were lowered from 17 per cent. to 14 per cent. and currently to 12 per cent.
How did the Government finance that vastly increased borrowing requirement? Did they print money? Of course not. They borrowed money. They did so because the money was available. They were able to borrow it at a rate far lower than their own MLR.

Mr. Lawson: Is the right hon. Gentleman aware that his right hon. Friend the Member for Leeds, East (Mr. Healey), when Chancellor of the Exchequer, said:
Our aim will be to bring about a reduction in interest rates from their present high level as soon as this is feasible. There is no short-cut available here … It will depend on our ability to restrict the public sector borrowing requirement".—[Official Report, 26 March 1974; Vol. 871, c. 284.]
What does the right hon. Gentleman have to say to that?

Mr. Shore: I shall answer the right hon. Gentleman's question when he answers the far more pertinent question of how it was that he had more than a 50 per cent. increase in last year's PSBR and at the same time reduced interest rates. He had better answer that. I think that we shall leave it at that for the time being.
What is the justification for making further cuts in public expenditure in the midst of the worst recession that we have had for 50 years? I can find no reason other than blind prejudice. First, I see the Prime Minister's instinctive hostility to services—other than defence and internal security—which are collectively provided, because they are collectively provided. Secondly, I note the primitive belief of the Prime Minister, the Chancellor of the Exchequer, the Financial Secretary and the handful of monetarists who advise them—namely, that, once they have flattened the economy there will be some spontaneous growth, some phoenix from the ashes, in the private sector. There is no evidence of that. To base national economic policy on what is no more than prejudice and blind faith is utterly wrong.
The Labour Party's approach to public expenditure is in sharp contrast to that of the Government. We believe that the collective standard of living plays as crucial a part as the individual standard of living in the welfare and life of our community. Moreover, we believe that the public sector, especially publicly owned industry, public infrastructre and capital investment, makes a direct and indirect contribution to the growth of the economy.
We are not alone in that belief. For example, there is the CBI's submission of evidence shortly before the Budget. I recommend Ministers to re-read it. It came to some important conclusions from the distinctions that it drew between what it described as our over-interest, as it were, in the quantity of the PSBR and our insufficient interest and analysis in what it called the quality of the PSBR.
The CBI referred to Interest rates. It made the now familiar point that every 1 per cent. reduction in interest rates means a reduction in costs for industry of about £350 million a year. It also said that every 1 per cent. reduction in interest rates means a saving to the Government in debt interest of about £250 million a year. That is an argument that I had not previously seen emphasised or confirmed.
In spite of the stubborn tenacity with which the medium-term financial strategy has been pursued and in spite of its brutal reaffirmation in last month's Budget Statement and in the White Paper before us, I do not believe—I have a feeling that many in the House do not believe either—that the Government's position can be held for much longer. However, as the Government have nailed themselves so firmly to the mast of dogma, movement is bound to be both painful and slow.
In my concluding remarks I shall make some suggestions and comments that are designed to assist not so much the Government as the bruised and battered nation that we should all seek to serve. First, let the Government propagate the truth about the PSBR. Even now, in the midst of this deep recession, the Government cover all their current expenditure, including debt servicing, from their own tax revenues and receipts. Borrowing is related entirely to capital expenditure and reflects in large part the fact that we are a mixed economy with a large public sector of industry and with active policies for the support of private industry.
Secondly, let the Government explain to their blinkered supporters that the United Kingdom's PSBR is, when the public sector of industry is allowed for, broadly in line with that of other countries. At the back of the economic paper presented by the Commission to the recent Maastricht summit there is a table that sets out the net Government borrowing of the member countries of the EEC. As right hon. and hon. Members will have noted, the United Kingdom in 1980 had, on the definitions employed there, a general borrowing requirement of 2·3 per cent. of GDP against an average 3·6 per cent. for the whole of the Community.
Thirdly, surely it is time that we looked again at the definition of the PSBR. I am glad that the Chief Secretary said that he was willing to think and to think again about that. The last Labour Government—I pay tribute to my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), the former Chief Secretary—made important and helpful changes in what was previously the PSBR. However, it is time that we thought more radically about the whole matter. There is a growing view, which I share, that it is nonsense that public corporations that borrow in order to finance capital expenditure—no one doubts that, for example, British Telecom and British Rail could increase substantially profitable investments—should, because of the Treasury guarantee, be counted within the PSBR in the same way as subsidies for local authority tenants and defence appropriations.
This is a deplorable White Paper which will add to all our difficulties. We shall not get public expenditure right


and we shall not be able to make the contribution which public expenditure could make to the alleviation of our national problems and the alleviation of the great problem of unemployment until Ministers remove or have removed for them their mental blockage, and until they are able to free themselves from the intellectual prison in which they have placed themselves. Meanwhile, the Opposition will vote with conviction for the amendment that I have moved this afternoon.

Sir Hugh Fraser: I congratulate the right hon. Member for Stepney and Poplar (Mr. Shore) on his powerful attack on the Government, ending with the clarion cry to the British nation that we should redefine the precise meaning of the PSBR.
One of the problems of debates such as this is that they become too technical. I am no economist, so I shall not delay the House for long. With 364 economists deciding that the Government are largely wrong, especially those who have been advising them over the last 30 years, one hears but the cacophony of men blowing their own trombones and sounding their own uncertain trumpets. The debate should be not so much about the technicalities of the PSBR as about the use of national resource. That is why one can agree to a certain extent with both the right hon. Member for Stepney and Poplar and my right hon. and learned Friend the Chief Secretary.
Over the last few years two problems have emerged. One is stagnation and the other is the obsolescence of our national heritage and of our infrastructure, such as roads, railways and sewers. That comes out clearly from the expenditure on capital account by both the Labour Government and the present Conservative Government. There has been a drop in investment in permanent assets. That will have to be put right.
Opposition Members say that the way to solve that problem is to borrow and to borrow again, and to buy oneself out of the situation. I believe that that is wrong. It will not work. But one new factor could be used, which is our greatest asset; that is, youth, our young people, who at the moment are neither fully engaged in practical purpose nor properly employed. Right hon. and hon. Members may have seen an article which I wrote in The Times yesterday. It was about some form of national service and its reintroduction. They may have also seen a letter in The Times today from Dr. Dickson, a distinguished man, who founded Voluntary Service Overseas.
At the moment about £1,000 million is being spent on the creation of non-jobs, through youth employment schemes and others. The time has come to see whether we can put this money to better and more effective purpose.
Many of the buildings and much of the infrastructure of the country were constructed with cheap labour in the 1850s, 1860s and 1870s. They are now in dangerous decline. There are no major programmes for reconstitution, whether by local authorities or Government. Others have said before that youth must be asked to make some sacrifice and to give its labour for a year or so below the going price. That is happening in Nigeria, Singapore and Spain, to considerable purpose.
That is why I believe that the time has come for the Government to study the question whether better use could

be made of young people through some form of compulsory service. To that purpose, I suggest not that a Royal Commission should be set up but that there should be an immediate investigation involving the CBI and the TUC. The hon. Member for Newcastle-under-Lyme (Mr. Golding) and my hon. Friend the Member for Chelsea (Mr. Scott) were discussing the problem of youth yesterday.
Much harm is being done to young people by the present situation. The lack of training and our inability to get ahead with doing what we need to do should be investigated. I hope that the Prime Minister will seriously consider setting up a group to report to her, with representatives of the TUC, the CBI and Ministries involved—Treasury, Defence, Home, Education and Employment. It should see whether it can find in a national service scheme something more effective than the present system, which for many young people is unsatisfactory, gives them little hope and does not contribute in any way to solving our problems. Perhaps I am asking for something which is outside the scope of the debate, but we should be talking about the use of national assets. One asset which is not being used by this Government, and was not used by the Labour Government, is the youth of this country.

Mr. William Hamilton: Like the right hon. Member for Stafford and Stone (Sir H. Fraser), I am not an expert in technical economic jargon, particularly that used by the Chief Secretary. There was a stark contrast between his speech and the speech of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). The right hon. and learned Gentleman's speech was prepared by the Treasury pundits. The Treasury's approach has brought us to our present situation. My right hon. Friend brought us down to reality.

Mr. Lawson: He did nothing of the sort.

Mr. Hamilton: I shall reply to the right hon. Gentleman in a moment.
The Chancellor of the Exchequer's track record since the election is one of catastrophic failure from the word "go". His first Budget increased VAT from 8 per cent. to 15 per cent., which immediately put 2½ per cent. on the retail price index. It distributed the tax burden in the most unjust and inexorable way from the rich to the poor. Almost exactly a year ago the Chancellor presented his financial strategy with the panache for which he is well known, and claimed yet again that it would lead to growth, the creation of real jobs and low inflation. Instead, we have real dole queues—not Saatchi and Saatchi dole queues—increasing day by day. Instead of real and sustained growth, we have endured the most catastrophic fall in manufacturing output in 50 years.
In November last year the Chancellor said that the one thing that was under his control was the money supply, but that has widely overshot his target by about £5,000 million—a mere bagatelle in Government terms. So glittering has been the Government's success in the past two years and so bright the prospects that at least half the Government have decided to continue the process. It is a bit like the charge of the Light Brigade, which also decided against a U-turn, with the same devastating results.
With unemployment rising remorselessly and with the clear need to extend demand directly and indirectly to


create jobs, by building houses, schools and roads and investing in the infrastructure, such as railway electrification, the Government produce a White Paper that tells us to keep taking the medicine, as we have not yet died—but that will come. That is what is so devastatingly incomprehensible about the White Paper.
The Chief Secretary went out of his way to say that the previous Budget was not deflationary. Phillips and Drew is a highly respected stockbroking firm, which the Government quote when it is to their advantage. I do not know whether he has read that firm's forecast, but it says, as do the CBI, the TUC and almost everybody else, that that Budget and the previous one and this White Paper will enormously exacerbate unemployment and price rises.
The Treasury and Civil Service Committee was chaired by the chairman of the Tory 1922 committee, who, as a great City man, knows what he is talking about. My right hon. Friend the Member for Stepney and Poplar made the point about the increase in public expenditure as a percentage of GNP, despite the Government's attempts to cut it. The more that they try to cut public expenditure, the more it grows. More and more money is being spent on keeping people sitting on their backsides or on their feet in dole queues, doing nowt, while thousands of people are waiting to get into hospitals or into local authority housing and are prevented from doing so because of the shortage of wherewithal to provide facilities.
The Committee was unanimous. In paragraph 20 it stated:
a large part of the fall in public expenditure from 1981/1982 to 1983/84 arises from reductions in expenditure on the industry and employment programmes".
Support for aerospace, shipbuilding, steel and vehicle manufacture will have fallen from £820 million in 1981–82 at 1980 survey prices to £30 million in 1983–84. More startlingly, in view of unemployment, Department of Employment expenditure will fall from £1,797 million in 1981–82 to £1,290 million in 1983–84. As the report states, the Government are running down special employment programmes at a time when even the White Paper is projecting a rise in unemployment. Unemployment will rise progressively over the next two years, but the Government are cutting drastically the money that they are prepared to spend. That is one example of the mess into which they have got us.

Mr. Eggar: It would help the House if the hon. Gentleman did not misrepresent the contents of the report. It stated:
The White Paper has apparently included only spending that has already been approved",
before going on to make the points that the hon. Gentleman has made.

Mr. Hamilton: The hon. Gentleman was on the Committee, and presumably agrees with the report, which was unanimous. Over the next few years there will be a big cut in Government help for the unemployed—

Mr. Eggar: That is not what the report says.

Mr. Hamilton: —at a time when all the signs are that unemployment will increase to at least 3 million before the end of the year.
I turn to some of the specific points in the White Paper. The country's future welfare depends greatly on our investment in the younger generation, but education, right through from nursery schools to universities, is being

slashed by the Government more harshly than anything else. Universities are faced with cuts of £150 million in the next two years. The University Grants Committee can either opt for fair shares of misery all round—to use a favourite expresson of the Secretary of State for Energy, who has his fair share of misery—and ask universities to cut uniformly or close a few universities or faculties within universities.
In Scotland, two teacher training colleges are already threatened with closure and an amalgamation is also threatened, without consultation or adequate explanation. Glasgow university is not under immediate threat, but it plans to reduce its academic staff by 317 over the next three years, and further job losses are possible in the same period. In this session Glasgow university has lost £½ million in fees for overseas students because the Government have increased fees beyond the level that poor students can afford.

Mrs. Gwyneth Dunwoody: Is my hon. Friend aware that the London School of Hygiene and Tropical Medicine and other such establishments may have to close altogether?

Mr. Hamilton: The Government know that. Some universities are in danger of bankruptcy, which has never been heard of before in the history of British education.
The Secretary of the UGC and the Permanent Secretary to the Department of Education and Science appeared before the Public Accounts Committee only a couple of weeks ago, on 17 March.
They told us that, on the most optimistic view, if these plans are carried out there will be at least 3,000 redundancies among university academic staff in the next three years.
When my right hon. Friend the Chairman of the Public Accounts Committee and former Chief Secretary to the Treasury asked what the redundancy pay for those 3.000 would be, the secretary of the UGC said that it would be anything from £40,000 to £80,000 each. When we asked what the total would be, he said that by extrapolation—multiplying £40,000 to £80,000 by 3,000—it would be anything from £100 million to £200 million. Redundancy payments alone would amount to more than the cost of keeping those people on their existing salaries. In order to save money the Government are actually spending more. The situation is exactly the same when translated to the dole queues.
The situation in Scottish schools tells the same story. The Glasgow Herald of 12 March states:
Government spending in Scotland is to be cut by £128 million next year, with further cuts to follow, according to the White Paper …
It shows that over the three years up to 1983–84 there will be a cut of 7 per cent.
According to local authorities and education pundits in Scotland, a 7 per cent. cut in the schools programme must mean a deterioration in the quality of education provided. At the same time, the Government are providing increased public money for a minute, private fee-paying sector. Working-class taxpayers in my constituency will have to pay increased taxes, VAT and so on in order to provide aid for a minute, privileged section of Scotland's child population, while the others will have to take the rap all round. Those are obscene priorities.
Some sectors, however, are not for cutting. I shall put on record some other facts obtained by the Public


Accounts Committee. Before doing so, I remind the House that in the interests of saving taxpayers' money a moratorium has been placed on the construction of 10 houses in Glenrothes new town, in my constituency, for tenants in wheelchairs. Apparently, we cannot afford perhaps £100,000 to build those houses. That is what the Government have done, and that is how they will continue.
In some areas, the Government can afford to spend money. Not long ago, the Navy department at the Ministry of Defence informed the Public Accounts Committee about the construction programme for new ships. For obvious reasons, I shall not identify the ships, but I put the figures on record. For ship A, the original cost was estimated at £165 million. Adjusted for price variation, the estimate is now £247 million.

Mr. Bruce-Gardyne: Where is it being built?

Mr. Hamilton: It does not matter where it is being built. I am concerned with the principle of priorities in public spending. We cannot afford £100,000 to house 10 people in Glenrothes who are confined to wheelchairs, but we can afford £247 million to build one ship.
For ship B, the original estimate was £236 million and the adjusted estimate is £301 million. For ship C, the original estimate was £133 million and the adjusted estimate £193 million. For ship D, the original estimate was £102 million and the adjusted estimate £124 million. For ship E, the original estimate was £82 million and the adjusted estimate £104 million.

Mr. Eggar: rose—

Mr. Hamilton: The hon. Gentleman can make hos own speech. I am making mine.
If one adds up the totals, original estimated cost was £718 million for the five ships—that will terrify the Russians—and the adjusted cost is estimated at £969 million.
Those priorities are unacceptable to us. They will create massive unemployment and hardship, combined with the cuts in education and in certain areas of social security. Having sat in Committee on the Social Security Bills, I know that many people endure tremendous hardship. They will suffer even more in the future. At both ends of the chronological scale—the young and the very old, together with the sick and the disabled—people will suffer as a result of the Government's policies. They will suffer even more if the proposals in the White Paper are implemented. As my right hon. Friend the Member for Stepney and Poplar said, it is a devastating White Paper for the welfare of the British people both now and in the future. The sooner we get rid of the people responsible for it, the better.

Mr. Tim Eggar: I shall not try to follow the hon. Member for Fife, Central (Mr. Hamilton) except to observe that he might like to explain to his hon. Friends in shipbuilding constituencies that he wishes to put out of work their constituents who are employed in British shipyards. His priorities may differ in this instance from those of some of his right hon. and hon. Friends.
I think that there is general agreement among Conservative Members that the Government have not gone far enough in reducing public expenditure, despite the very

determined efforts that they have made. One must go on from that to see whether there is a consensus on how further reductions are to be achieved.
It is easy to single out public sector pay, but it is not much good now referring back to the Clegg awards, which were as much a part of our election programme as expenditure on defence. We all now recognise that the Government are at long last taking strong action to restrict increases in the public sector wage bill.
However, it is totally unrealistic for Conservative Members to say that the necessary savings can be made through restrictions on cash limits, administrative savings or restrictions on wages. Although every 1 per cent. above the 6 per cent. limit on pay increases in the public sector adds £300 million to public expenditure, which is no inconsiderable amount, that must be set against total spending on social services of well over £20 billion. Although restrictions on public sector pay make a significant contribution, they must not be taken out of perspective.
There is a general feeling on the Conservative Benches—I think that the Chief Secretary recognised it by giving the amount of time to the subject that he did in his excellent speech—that we have to consider seriously whether we can increase the total percentage of public expenditure that is taken up by capital expenditure. Yet we have to recognise that it is just at a time of declining national wealth, at a time of deep recession, that the pressure for public current expenditure increases. It increases from the lobbies inside and outside the House.
The reality of both Conservative and Labour Governments over the past 20 years is that, consistently, in the fight over allocating public funds between current and capital expenditure, current expenditure has won time and time again.
Conservative Members have to be honest. If we believe in further public expenditure cuts, where are we to find them? We can, of course, find a little bit on wages, as I have said, and on administrative savings. But basically we have to ask ourselves "What is the largest sector of public expenditure that has been growing significantly and inexorably over the past 10 years or more?" It is the social services budget.
Only one Conservative Member has faced this problem—my right hon. Friend the Member for Daventry (Mr. Prentice). He was absolutely clear about it. He said that, given the position in which this country finds itself and given the need to reduce public expenditure, there is only one logical area to look at, and that is the area dealing with pensions, unemployment benefit, and current transfers to the disadvantaged in our society.
My right hon. Friend was honest about the problem, but I regret that at times Conservative Members, when they call for additional reductions in public expenditure, do not spell out what this implies.

Mr. Austin Mitchell: Go on—spell it out.

Mr. Eggar: I suspect that when it is spelt out the political and social implications of calling for reduced public expenditure will overweigh the rhetoric that is swelling through the Conservative Benches, and we shall recognise that politically we cannot do what so many Conservative Members are calling for. We have to face reality. If we are to have significant further reductions in public expenditure there is only one place to look for them,


and the sooner the Government put it clearly to the party and to the country, the better. We cannot go on fudging this very important issue.
I hinted earlier that I thought that within the same approximate total of public expenditure, and within the same PSBR, we should be looking to increase the role of capital expenditure. I should like to make three suggestions which I hope will go some way to being compatible with the Government's PSBR targets and with the general economic strategy while at the same time meeting the criteria that were set down so admirably and so clearly by the Chief Secretary in his speech this afternoon.
I say immediately that I am not of the school that says that all capital expenditure is good and all current expenditure is bad. I take the reservations and the points that are made so forcefully in different ways by what might be called the "Brittan Brothers'. Nevertheless, there is a case—and a case in particular—for increasing the amount of public resources that are directed into revenue-producing capital projects.
My first suggestion is one that has hit the headlines and is widely discussed—the introduction of private sector funding into specific public sector projects. That is terribly easy to say; it is extremely difficult to do. The one thing that we do not want to do is to introduce funds that are, in fact, an alternative to gilts—a sexier form of gilts, another way of lending to the Government.
If we are to pursue this objective we have to ensure that funds coming in from the private sector are true risk capital. I differ from the Chief Secretary in that I think that he failed to differentiate between true risk equity capital coming into the public sector and additional loan capital. I agree that if all that we can come up with is additional loan capital there is little to be said for the schemes that have attracted so much publicity. I think that we shall find that there is limited scope—I stress the word "limited"—for the introduction of risk capital into the public sector.

Mr. Bruce-Gardyne: I apologise for interrupting my hon. Friend. Before he leaves the subject of the injection of risk capital, will he explain how it is possible to achieve the concept of genuine risk capital in institutions which, by definition, cannot go bankrupt?

Mr. Eggar: That is the main problem—how to get away from the Government guarantee. That is why I said that the role was extremely limited. I would see it as being mainly in the form of joint ventures between private sector companies and a public sector nationalised industry, where the nationalised industry might be holding more than 50 per cent. of the shares. But I totally accept the point that was made by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne). As I said at the beginning, it is much easier to say than to do.
Secondly, the logical way for the Government to increase public capital expenditure and to relieve the pressure on the PSBR—I am surprised to find how little this is mentioned—is to denationalise the profitable nationalised industries. We have had some success in this area. We should not underestimate the considerable achievement of floating off 50 per cent. of British Aerospace. It was particularly pleasing to see the high proportion of shares taken up by employees in that issue.

But I hope and trust that the Government will go further, and the obvious targets are the British National Oil Corporation and the British Gas Corporation.
I hope that the Government's decision not to proceed with the further stages of the Petroleum and Continental Shelf Bill will mean that when that Bill is reintroduced there will be measures to ensure that BNOC is denationalised as soon as the Bill becomes law. It simply is not adequate merely to give the Secretary of State for Energy powers to denationalise in the future.
I say to the Financial Secretary to the Treasury—I know that he has some sympathy with my approach—I hat we must look beyond the BNOC, to the BGC. As far as I am aware, there has been no public discussion in the party about the possibilities of privatising the British Gas Corporation. I fully recognise that if we are to go down that route we have to take measures to limit the BGC's monopoly powers, because it is no good replacing a public monopoly with a private monopoly.
The Government have to tackle the whole area of the introduction of competition into the gas industry as part of the effort to take the British Gas Corporation out of the public sector.
It is worth while spelling out the advantages of denationalisation, purely from the economic point of view, and leaving aside the question whether it increases competition. Privatisation reduces the public sector borrowing requirement in the year when it occurs. It relieves the PSBR of capital investment charges in future years and, due to the tax regime, there would be limited—if any—reductions in future revenue accruing to the Government as a result of privatisation.
Thirdly—I am conscious that I am stepping on sensitive ground—the Government need to consider carefully the establishment of a North Sea revenue investment fund. I appreciate the Treasury's reluctance to hypothecate revenue. It is a reluctance shared by Treasury Benches of both parties. I understand the Treasury's argument that. North Sea revenues are already spoken for. That is why I make a limited suggestion, which I hope will enable the Treasury to fight off the pressures from the spending Departments and lobbies, to try to ensure that at least some future North Sea revenues go into capital investment.
The idea is that as from this financial year any increase in real income from North Sea revenue should be put into a separate fund under the control of the Treasury and the Treasury alone. The Treasury, appropriately, advised, as it would have to be, would decide which projects put forward by the still nationalised industries, the private sector and spending Departments, made sense and were viable. It would be up to the Treasury to allocate what funds would be available for those various applicants.
The Treasury should expect interest on the money lent and in time it should expect capital repayments. I accept all the difficulties and problems about project selection, how one decides whether a project will be profitable and how one decides between different priorities. Nevertheless, unless steps are taken by the Treasury to safeguard the real increase in revenue from the North Sea against the ravages and attacks from spending Departments and lobbies, in two or three years' time, despite all our good intentions—good intentions that the Labour Government shared—the benefits of the North Sea will flow into current spending.
In times of recession and economic difficulty—and in the relative prosperity of the past 20 years—in the battle


between allocating funds for capital expenditure and current expenditure under both Governments, current expenditure has always won.
We have a duty to try to ensure that the net capital disinvestment that has been occurring for a number of years should be reversed. We have been eating up the capital left to us by our predecessors. It will not be easy, given the likely economic outlook for the next three or four years, whatever economic policies are pursued. But we should show a determination to try.

Mr. Richard Wainwright: I imagine that I am not the only hon. Member who feels that the hon. Member for Enfield, North (Mr. Eggar) has proved himself to be a shining light among the flickering candles on the Conservative Benches, because, at last, after we have been debating the matter for two and a half hours, he has introduced the highly relevant subject of North Sea oil revenues. It is astonishing that neither Front Bench deployed that important element of our resources.
In speaking to the Liberal amendment, I am glad to follow the hon. Member for Enfield, North on the subject of capital expenditure. I dissent entirely from his view—a view that I know he holds deeply—that increases in capital expenditure must be at the expense of reductions in current expenditure. It is worth recalling that the hon. Member for Enfield, North was unable to persuade the Select Committee on the Treasury and Civil Service, despite its majority of Conservative Members, to adopt that view. The report makes no suggestion that increases in capital expenditure would be at the expense of current expenditure.
I shall discuss how capital expenditure should be increased. But I hope that it is common ground that before we pass any plans for public expenditure, whether they are small or, in the opinion of some Conservative Members, too large, we have a duty to examine whether systems of control exist that will ensure value for money. In that respect the Government are proving themselves poor stewards. The Select Committee was informed of poor control and the Treasury accepted our adviser's paper. In his Budget Statement the Chancellor of the Exchequer was eloquent about the importance of the cost of public expenditure. The cost in 1980–81 seems to have been higher by £750 million, at 1979–80 outturn prices, than was intended by the Labour Government in their public expenditure plans for 1980–81. From the same adviser we have the information, accepted by the Treasury, that at 1979–80 prices the unforeseen rise in relative costs added £700 million to planned expenditure in the health programme in 1980–81.
Those are formidable figures in the light of the revelation of what has been happening to the cost of public expenditure, having regard to the much higher rate of inflation in public spending items than the general rate of inflation. The Chief Secretary was too coy to reveal that in his speech when I challenged him. Because of my worries about that revelation I am alarmed that the Chancellor of the Exchequer proposes that a further change in the control of public expenditure will be based on a system of cash limits.
Cash limits were necessary as a desperate expedient when the traditional accounting controls in Government

Departments broke down. When accounting officers no longer felt shame at losing control of Government spending there had to be a desperate and primitive expedient of cash limits, but to use that as a basis for a whole new system of controlling public expenditure seems to be perverse.
When the Financial Secretary winds up the debate I hope that he will tell us what consideration the Treasury gave to the recommendations made by the Armstrong committee on budgetary reform. That committee devoted a considerable passage, with much detailed evidence in support, to the proposal that we transfer to a system of controlling programmes by cost. Unless the Government have some compelling reasons to feel that the Armstrong committee was completely on the wrong track, they are arrogant to announce the change without consulting the House and without giving hon. Members the opportunity to debate the Armstrong report.

Mr. Lawson: The hon. Gentleman will be aware that cash involves cost. The cash measures the cost.

Mr. Wainwright: That fact has dawned on me. I forget what age I was when that truth was revealed to me. As the Financial Secretary must have realised since his early youth, cost measures value for money. It is not a question of how much cash is poured out. That is a primitive test. The real issue is what value the country gets from its expenditure. In that respect the Armstrong committee's views are important.
My concern about the whole rocky basis of the proposed new system was heightened when I heard the Chief Secretary's speech today. In an earlier stage of my life I was accustomed to the vagaries of even the best-trained lawyers when talking about accountancy. However, this afternoon the Chief Secretary surpassed anything that I have heard from a lawyer on accounting.
The right hon. and learned Gentleman talked about public expenditure. He dismissed the difference between capital expenditure and revenue expenditure. At one moment he called it statistical and at another technical. His main argument was that in Government spheres capital items are not depreciated. He said that the reason why the Government do not depreciate their fixed assets was that most of them were not revenue-earning.
Such a flouting of fundamental accounting principles cannot often have been aired in the House with a straight face. The Chief Secretary used the Thames barrage as an example, perhaps because it is not yet built. Whether the Thames barrage will earn revenue does not matter a fig in terms of depreciation or obsolescence. Everybody knows that it will wear out. If we are to have Governments accounts worthy of the name and are to rescue the head of the Government's accountancy service from his refugee quarters in the Department of Industry and bring him to the Treasury, where he should have been 30 years ago, we shall have to allow an amount each year for the depreciation or estimated obsolescence of the Government's fixed assets. Until then everything is bound to be cockeyed, and we shall have to make the best we can of a bad job.
The way to patch up the system is not to rely on the primitive device of cash limits. I hope that the House will have the opportunity to express its views before the Government persist in introducing yet another control measure that is bound to fail.
Another consequence of having inadequate systems of control over any expenditure, whether in a private corporation or in the Government, is a lack of confidence, especially in capital spending, and an over-cautiousness amounting to timidity. That is what has happened to the Government. They know that their systems will let them down. They are therefore cautious to a fault when launching capital expenditure. The dismal history is well known. The Government are deliberately coy about the future, and they have good reason to be.
Paragraph 16 of the Select Committee report states:
It is still not possible to tell how much the Government intend to spend on, for example, capital projects as opposed to say subsidies or lending, and it is not possible to assess satisfactorily the full implications of the expenditure plans
That is for the years after 1981–82.
That concealment has a purpose. That measure of concealment came in with the present Government.
The past gives us a grim enough guide to what is happening. The Select Committee report reveals—although the figures were known already—that the percentage of total public expenditure devoted to fixed capital expenditure at 1980 survey prices has come down steadily from 19·4 per cent. in 1975–76, to 12·5 per cent. in the year just ended. The estimated figure for 1981–82 is 12·4 per cent.
That is an appallingly steep decline. The Government have said nothing to suggest that it will be arrested. A drop in public capital expenditure immediately knocks private industry. With the exception of a few workshops in the nationalised industries, the public sector draws its capital goods from the private sector. Many public corporations spend the bulk of their capital moneys in this country, so that the spectre of a rush of imports is not involved.
There are many urgent needs for capital expenditure. In the manufacturing areas of the North of England huge main sewers, on which public capital was spent well over a century ago, are collapsing every week. If citizens are gathered round an enormous gaping hole in a street in central Manchester, even the author of the article on public investment in today's Financial Times will not say that they should stubbornly refuse to get the council to do anything about it until somebody has produced a certificate about the rate of return on the new capital employed in reconstruction.
Mr. Samuel Brittan's lecture this morning on the dangers of public money being spent on swimming baths with artificial wave-making machines was an illustration of him at his most frivolous. Expenditure is needed on the sewerage systems in the manufacturing areas of the North.
The increasing dilapidation of our railways is another example. The British Rail corporate plan for 1981–85 envisages an expanding investment programme from £287 million in 1981 to a peak of £461 million, at 1980 prices, in 1987. The programme is designed mainly to recoup the backlog of renewals in track, signalling and rolling stock and to renew the totality of the system at an improved level of performance.
The chairman of British Rail says firmly that the decision year for the whole of the plan is this year. It is astonishing that the Government should turn such a relatively deaf ear to such obviously necessary expenditure, which could provide work for a large number of skilled unemployed people.
I have deliberately chosen obvious examples to which even Mr. Samuel Brittan cannot take exception. My third

example is the increasing inability of British citizens to make the telephone calls for which they rent their instruments. British Telecom is frank about it. The chairman does not disguise his dismay at the dilapidated state of the system. His predecessor, Sir William Barlow, handed in his premature resignation because with the meagre capital that the Government allowed him he could not be responsible for the future of the system.
The chairman of British Telecom, Sir George Jefferson, said on 19 March:
Even if we implement substantial economies in the current plans, unless we can bank on very substantial increases in external borrowing, we win not be able to sustain the very minimum programme necessary to avert serious damage to our supply industries and avoid a disastrous telecommunications situation developing over the next few years.
I understand from British Telecom that it estimates that 90 per cent. of such moneys would be spent with firms in this country. In the face of these obvious needs—there is no need for elaborate computations to establish notional rates of return down to the last digit—it is perverse that the Government should refuse to provide the necessary finance. The unemployment effects of such schemes would be subject to considerable lag, but at least a decision now would have enabled the supplying firms to get design work going and to get tooled up for production. Gradually, the whole programme would have gathered momentum.
Before concluding, it is necessary to face the question of raising the money.

Mr. K. J. Woolmer: Before the hon. Gentleman deals with the question of investment in the nationalised industries, will he consider the argument that the likelihood of even a meagre level of investment being achieved will depend largely upon the nationalised industries' ability to generate internal finance to pay for the investment. A large part of the Government's plans depends on a massive switch to internal finance, amounting to between £2 billion and £3 billion over two years. Will the hon. Gentleman comment on the likelihood of this having two effects? The first is a large increase in prices, in addition to the big increase in gas and electricity prices, which will give another inflationary push. The second, equally probable, is the likelihood of the non-fulfilment of those investment plans because the finance will not be available.

Mr. Wainwright: I am grateful to the hon. Member for Batley and Morley (Mr. Woolmer) for making that point, even though he has tempted me to take a minute or two longer. The hon. Gentleman is right in his inference. I am sure that I am not the only hon. Member who finds it impossible to say to my elderly constituents "Never mind, chum, about this vast rise in your electricity bill. Think of the marvellous power station that will go up when you are dead and buried. Your grandchildren will be very grateful that you worked yourself to the very bone to pay for their power station". It is not honest financing to raise money now from people who will never, in the course of nature, enjoy the benefits.
I was referring to British Telecom. I am advised that until five years ago the rough rule of the Post Office telecommunications division, as it then was, was to raise 50 per cent. of its investment needs by borrowing. It estimates that this year only 15 per cent. of its investment capital will be borrowed. The hon. Member for Batley and Morley has drawn attention to the point. A perverse percentage of nationalised industry investment is being


raised unfairly at the expense of today's consumers by the peculiarly uncivilised device of enormous leaps in cost that completely destroy any attempt at household budgeting.
I had been about to conclude by mentioning the question of raising the money. As is well known, we on the Liberal Bench have no time for the Government's preoccupation with screwing down the PSBR on the wholly unjustifiable excuse that in some way or other—the Government never come clean about it—that is the only way to bring down interest rates. The history of the past year, if there was not already enough history on the point, disproves that assertion. In any case, there are many inventive ways, still not explored, of raising money for wealth-creating projects.
I would like to mention one. The Government are guilty in that they sit back and passively accept the prospect that this country's marvellous propensity to save—one of our greatest national assets, exceeded only by the French—is bound to fall. In their Red Book the Government accept—the Financial Secretary must take responsibility—that the savings ratio is expected to fall. There is no reason why a Government who claim to be the Government of entrepreneurs should sit back and allow that to happen. The Government say that it will happen because in times of high inflation the British people feel the need to save in order to preserve, so far as possible, the worth of their financial assets. Yet one was brought up on the opposite maxim—that if inflation goes over a certain point and shows every likelihood of persisting, people lose the propensity to save. That has happened in the United States of America. The Governor of the Bank of England reminded the Select Committee only a few days ago that it happened in America as soon as inflation began to take off there.
There is no reason for the Government to sit back and say that far less savings must be expected from the public. If the Government were able to come forward with investment schemes in public services—schemes that would have an appeal throughout the country to every type of person—and make these the motive force for a big savings drive, they might be astonished by the results. It happens elsewhere. Many countries make a direct appeal to the savers in the community in order that they themselves shall have a better standard of service from public corporations.
Whether the Government choose that method or pursue some more ingenious course, which they have every opportunity to explore, no hon. Member will doubt that the Government, as stewards of our public assets, are allowing them to deteriorate. They are failing to modernise. When we have such a vast army of unemployed skilled people, who are desperately anxious to work, that is perverse indeed.

Mr. Mike Thomas: I share the views of the hon. Member for Colne Valley (Mr. Wainwright) in most of his strictures concerning the White Paper. It is an appalling indictment of the Government's economic and social policies. As a recipe and, indeed, a record of this Government's capacity to get the worst of all worlds, it would take some beating. After all the bravado and the ballyhoo, all the election slogans, all the careful balance of tough talking on public expenditure

cuts, rash and seductive promises on tax reductions and smooth, cosmetic compassion for those in need, the White Paper yet again demonstrates the reality. Public expenditure is rising, not falling. The burden of taxes has increased by almost a quarter since the Government took office. Despite all that, the incompetence of the Government is such that the availability of public services to those who need them most is in savage decline.
It would be bad enough if there were any evidence that the Government's approach had a shred of logic and common sense or practical experience to support it. It is interesting to witness the notable lack of enthusiasm on the part of Conservative Members to support the Government's policy in this debate. I suspect that the majority of hon. Members who speak from the Government Benches will be opponents of the Government and the line that they are taking—in so far as this can be understood—rather than supporters.
We are told that even in a recession public spending must be cut to get inflation down and to allow the economy to prosper. Countries such as West Germany, France, Belgium, Holland and Austria are all instanced to us as golden examples for Britain to follow. They have had higher growth rates, lower inflation, and higher real living standards for their people. If the Government are right in their analysis it is strange that those countries should also have generally had higher public expenditure as a percentage of GDP than Britain. The right hon. Member for Stepney and Poplar (Mr. Shore) was right in his analysis.
The relationship between public expenditure and the issues with which the Government claim to be concerned is not only not proven; it almost appears that there is no direct relationship at all except in the theology of the right hon. Lady the Prime Minister. We are told that it is critical that taxation should be cut in order to provide incentives. It is strange then that the tax burden should have risen from 40 per cent. of gross domestic product in May 1979 to about 48 per cent. now and that this, including national insurance contributions, should be helping to sustain our high level of inflation. That high level of inflation in turn threatens the Government's public expenditure plans and cash limits through public sector pay pressures.
From what the right hon. and learned Gentleman said earlier about public sector pay one could be forgiven for thinking that it was someone other than the Government who caved in to the miners and who, through successive Budgets, set the tone for public sector wage demands which, naturally and reasonably, are far in excess of 6 per cent. It is also strange that, in turn, the Government's policy should be deepening the already desperately severe recession and, through the cost of supporting industries and the unemployed who are hit by the recession, further increasing the pressure on public spending.
Indeed, the Government's figures in the White Paper do not seem to add up. How can they on the one hand postulate an increase of at least 500,000 in the unemployed by 1983–84, yet on the other anticipate that they will cut £500 million off their employment support programmes in that period? That cannot be the case. The very minimum that will happen to the Secretary of State for Employment, if he survives, is that every time another 100,000 move inexorably on to the unemployment figures, he will come back to the House with more palliatives and will need more money to spend on those- measures.
We are left with the worst of all worlds. Despite all of that, there are continuing reductions in the real amounts left to pay for public services to those who need them, and panic cuts in public capital spending which will ensure continued public squalor for the future. All that comes from a Prime Minister, who said in the election broadcast allocated to compassion during the 1979 election campaign:
We regard it as a privilege to say to the old, the sick, the needy and the disabled 'Don't worry, we'll look after you'.
That is from a Government who in February had the effrontery to issue a handbook on the personal social services entitled Care in Action". It even listed a series of Government priorities. However, today's White Paper, even without the further cuts about which they are talking, effectively rules out any chance of the Government fulfilling even one of the priorities which they set themselves less than two months ago.
In March, in this progression of public ministerial hypocrisy, we had another expression of concern in the form of a White Paper on the elderly, called "Growing Older". Again, every road that it suggests we ought to go down if we are to care properly for the old, is turned into a cul-de-sac by today's public expenditure White Paper discussion.
What does all this mean in real terms and for real people? I shall give a few examples as they affect one important group—the elderly. Let us take income. Anyone who glances at the proceedings on the Social Security Bill, or looks at a page of the material which the Child Poverty Action Group regularly sends us, will see that the elderly have already suffered, and have been cheated, by the Government. A pensioner couple is now between £250 and £300 a year worse off as a result of the Government's not making the earnings-related increase on pensions and as a result of the other clawbacks, such as the 1 per cent. on all the rest. I shall not bore the House by rehearsing that argument again. That is a substantial sum—£5 or £6 a week—for people who are often trying to get by on a disposable income of £15 or £20 at the most.
The most exceptional piece of niggardliness, again reflected in the White Paper, is the Government's attitude towards exceptional needs grants. For the elderly, those on supplementary benefit, one-parent families and others such as the invalid and the disabled, the new regulations effectively mean that the provisions which used to exist for people to achieve a reasonable standard of clothing and shoes, bedding and furniture and other items have now disappeared. It is now back to the jumble sales, secondhand clothes and second hand shoes. It is a return to living without the prospect of attaining even the minimum standards which the Government claim they propose to continue and support.
Other aspects of the Government's spending plans also affect the old, because it is not all income.

Mr. Eggar: In a notable speech, the hon. Member for Gateshead, West (Mr. Horam) made it clear that the Social Democratic Party believed in a higher PSBR even at the expense of an inability to lower interest rates. After listening to the hon. Gentleman it occurs to me that the whole of the permissible increase in the PSBR would be devoted to social services spending. Is the hon. Gentleman saying that his party does not believe in additional capital investment? How does he square his speech with that of his hon. Friend?

Mr. Thomas: I am saying that if we do not entertain the economics of the madhouse we do not have to deal with such problems in the first place. The elderly, the sick and the handicapped are now paying the price of nearly two years of economic lunacy.
Let us consider what the Government have said and what they have done about other measures affecting the elderly. I shall be more than pleased to have some answers from the Financial Secretary when he speaks later on, but I suspect that he will have no answers to the points that I am making on behalf of my party.
Speaking at a meeting of the WRVS in January, the Prime Minister said that the Government wanted to keep the elderly in the community. I agree. She said that it was a good thing that 95 per cent. of the elderly were still in the community. However, if an old person is reaching immobility, approaching the time when incontinence becomes a problem and is thinking with some trepidation about the prospect of residential care or a long-stay geriatric ward, what makes it possible for that old person to stay in the community? It is home helps and meals on wheels, yet charges for those have been increased, and about 33 or 34 local authorities out of 55 surveyed by the Association of Directors of Social Services have made substantial cuts in their provision of home helps and meals on wheels. What enables old people to stay in the community once they become infirm or handicapped`? It is the provision of aids and adaptations, and a telephone, an alarm bell, or some other means of communication, which will make them feel safe in the home. However, between 14 and 22 out of 44 or 46 local authorities are making major cuts in the provision of such items.
What makes life tolerable for a family which has an elderly person living at home? It is being able to get that person to a day centre, in order to provide some relief for the wife who cannot cope with an elderly relative 24 hours a day, seven days a week, 52 weeks a year. Yet because of Government pressure on local authority spending, the number of day centres is being cut. Most lunatic of all., in authority after authority charges are either being imposed on transport to the day centre, which puts it out of reach of the elderly, or transport is no longer available at all.
What is happening to residential care is reflected in the public expenditure plans. I understand that 48 out of 63 authorities have told the Association of Directors of Social Services that they are cutting residential care provision, sheltered housing, the possibility of holidays, and so on. Not only will that make it more difficult for elderly people to stay in the community; it will mean that those who go into hospital, sometimes temporarily—perhaps because of the hip problems which particularly affect elderly ladies—will find that their chances of returning to the community are diminishing.
Increasingly, what this means to the 15 per cent. or more of the population who are 65 or over is that they live in fear and trepidation that a move towards becoming less mobile, as people inevitably do, and towards incontinence, which is a problem that cannot necessarily be avoided, will mean either that they stay at home in wholly inadequate circumstances, without adequate support and in what increasingly become squalid surroundings, or they go into a long-stay geriatric ward that is wholly inappropriate to their needs, locked away and isolated, very often, in a hospital, in circumstances and surroundings that are less than satisfactory and with very little hope that anything will ever be done.
All of this, of course, is exactly the reverse of what the Government said they would do, claimed to be doing and wanted to do in publications in February and March of this year. And what proposals do the Government make to deal with all this? They make just two. The first is privatisation of medicine and health care and residential provision—a proposal which simply amounts to saying
Unto every one that hath shall be given,
I challenge the right hon. Gentleman to find me a widow aged 75, living in a council flat in my constituency, and starting, perhaps, to lose her capacity to get around, who will get any benefit from a private residential home, private medical care, BUPA, or, indeed, anything else. He knows that that is a cynical suggestion to make and that it is not a practical reality.
The second thing that the Government say is that there ought to be more voluntary community work. That is not a bad thing in itself. Before I entered the House I ran the Volunteer Centre, which was particularly concerned with that aspect of our community life. But it is hardly a convincing alternative when the Volunteer Centre tells me that the Government are effectively cutting the funds available for the appointment of voluntary service coordinators in the Health Service, when the National Council for Voluntary Service says that the pressure on local authorities is leading it to cut grants to voluntary organisations, and when relations between volunteers and paid staff in the present climate of public sector wage bargaining are coming under real stress as paid staff increasingly, although often mistakenly, believe that volunteers are being used as a cheap substitute for paid staff.
All in all, this public expenditure White Paper has the aura of "Alice in Wonderland". No one in this House will have much doubt as to who is cast as the Queen of Hearts in that scenario. Indeed, the compassionate right hon. Member for Chelmsford (Mr. St. John-Stevas) has already learnt that when she says "Off with their heads" she means it. No doubt, as the Treasury demands further cuts, other right hon. Gentlemen will have to look to their necks. But it is the sick and the elderly, whom not a year ago the right hon. Lady told Conservative trade unionists the nation had
a moral duty to care for",
who are the pawns on this particular Lewis Carroll chessboard, and they will not readily forgive the Government for what they have done.

Mr. Nigel Forman: It is particularly interesting for me to speak after the hon. Member for Newcastle upon Tyne, East (Mr. Thomas), because it was interesting to see the way in which he concentrated on certain aspects of public spending which, as my hon. Friend the Member for Enfield, North (Mr. Eggar) pointed out earlier, seemed to be at odds with some of the priorities of his hon. Friends in that fledgling party. We do not hold that against the hon. Gentleman and his friends, and we share very fully the concern of hon. Members on both sides of the House about the plight of the elderly, the sick and the unemployed. Such concern is not the exclusive preserve of any one party, least of all the Social Democrats. It appears that the Social Democrats, as at present constituted, have almost as many priorities as they have Members. I think that that tendency will do them

harm over the weeks, months and years ahead as the electorate comes to see the incompatibility of many of the vague and otherwise unexceptionable positions that they hold.
When considering the aspects on which the hon. Gentleman focused some of his attention—health and personal social services, and so on—one sees that it is clear that the record of this Government to date, in difficult circumstances, has been very good. I think that any fair-minded observer would agree with that. We have preserved health spending in the National Health Service, we have protected the position of pensioners in a very difficult period, and we have introduced improvements in both mobility allowance and child benefit. I think that such a record is not at all bad in difficult economic circumstances.
I do not want to devote the main part of my remarks to that subject; rather, I want to concentrate on certain important themes that I believe arise out of the White Paper that we are discussing this evening. I will preface what I have to say on that document by the simple observation that while nobody on the Government Benches would wish to see a panic U-turn of any kind, there is none the less one kind of U-turn that would be most welcome to all sensible right hon. and hon. Members, and that is a reliable and sustained upturn in the British economy. That is the kind of U-turn with which we could all live and of which we should like to see more. I am convinced that if the Government pursue their policies with resolution, as the Prime Minister said, but also with a considerable degree of tactical flexibility, such a U-turn is indeed achievable.
The three matters upon which I wish to focus in my remarks are, first, the Government's objective, which is stated very frequently, of reducing overall public spending as a proportion of the economy; secondly, the objective of reducing current spending as a proportion of total public spending; and, thirdly, the objective of increasing the quality and efficiency of public spending of whatever kind.
On the first point, it is very noticeable that overall public spending as a proportion of GDP has increased, even in the relatively short period during which we have been in office, from 41½ per cent. in the financial year 1978–79 to 44½ per cent. in the year 1980–81. That is apparent from paragraph 11 of the Red Book, part III. Clearly, this reflects the increase in both the volume and the cost of public spending at a time when real GDP has fallen by 5 per cent. over the past two years. It is not often realised how steeply real GDP has fallen over those two years. I am sure that this is a matter of deep regret to hon. Members on both sides of the House.
The possible answers to these problems must obviously include, as my right hon. and learned Friend the Chief Secretary indicated in his opening speech, policies that lay the basis for a return to real economic growth. That must be the top priority, however it is achieved. I submit that such policies must also include action to limit the relative price effect, because quite clearly one of the difficulties from which all recent Governments have suffered is this damnable relative price effect, which so often puts awry so many of the best-laid calculations of Treasury Ministers. Of course, as my hon. Friend the Member for Enfield, North said, this implies the need to look at the very disagreeable question, if only to reject the answers


that it suggests, of those areas of public spending in which the spending concerned is virtually obligatory and open-ended.
This is a very serious point in relation to the overall balance of public spending. It is very quickly made clear that whatever may be the theoretical justification for tackling that very buoyant part of overall public spending, in the real world we are all democratic politicians and we must seek the consent of the people. Therefore, it may well be politically impossible to attack this area of buoyant public spending at more than its fringes.
I turn to the proportion of current spending in total public spending. According to my calculations, current spending by central Government as a proportion of total public spending has increased in round figures from £45 billion, out of a total of £51 billion in 1976–77—that is, about 90 per cent.—to £51 billion, out of a total of £56 billion in 1980–81—that is a total of about 92 per cent. That is a reflection of the buoyancy of obligatory spending on social security at a time of deep recession. It is also a reflection of defence spending at a time of a strong relative price effect as bills come in faster due to the absence of other orders. The right hon. Member for Stepney and Poplar (Mr. Shore) did not recognise sufficiently that it also reflects the tendency of the Labour Government to go for the easy, soft option of postponing capital expenditure instead of attacking the problem of current spending. All Governments tend to do that. It proves that the same savings cannot be made twice.
Some capital projects having been postponed and pushed out of the Treasury's window, once such a percentage reduction has been achieved it cannot be achieved again. The decisions facing my right hon. and learned Friend the Chancellor of the Exchequer and other members of the Government are that much more difficult, because such options are no longer available. In local authorities there is a tendency for current expenditure to increase its share almost remorselessly. Indeed, the problem is perhaps more serious in local authorities than in the Government.
According to figures in my possession it would appear that total local authority current expenditure increased from about £15·9 billion in 1976–77 to £16·1 billion in 1980–81. That does not sound like a large increase, but it is significant that over the same period total local authority capital expenditure decreased from £6·4 billion in 1976–77 to £3·5 billion in 1980–81. The conjunction of those two movements leaves us with this serious problem. Therefore, local authority current expenditure has increased from about 70 per cent. of its total expenditure in 1976–77 to about 85 per cent. in 1980–81. Once again, that reflects the postponement of many capital projects and the concentration on statutory obligations, notably the recurrent cost of the education service, which is particularly labour-intensive.
As my hon. Friend the Member for Enfield, North pointed out, if we want to make significant savings—particularly in local authorities—we must take account of the fundamental fact that we are asking for more redundancies and unemployment. As hon. Members know, that immediately means a further cost to the Exchequer and could add to the public sector borrowing requirement. Therefore, answers to these problems are even more difficult to find than answers to the problem of overall public expenditure. As a result of a question that I tabled to my right hon. and learned Friend the Chancellor

of the Exchequer not long ago, I discovered that 44 per cent. of total current spending represents transfer payments backed by statute in some form or other. This is an inherent part of our society and of our responsibility to all sections of the community. It underlines the difficulty that inevitably faces those of my hon. Friends who would like to make more easy savings in this area.
In the coming months and years the greatest service that we, can do for our constituents is to refrain from making the glib speeches that all too often we tend to make when in Opposition. They may receive quick and easy applause, but once in office more realistic calculations have to be made. One finds to one's disappointment, and to the bitterness of the audience that listened a few years before, that those incautious promises cannot be delivered.
The remaining 56 per cent. of expenditure is on essential goods and services, which are often purchased from the private sector. Therefore, as the hon. Member for Colne Valley (Mr. Wainwright) said, they have some beneficial effect. A large part of that remaining 56 per cent. is inevitably public sector pay. As all Governments know to their cost, it is often difficult to limit such pay. Once again, the problem would be easier to solve if there were a return to real economic growth and if there were action to limit the relative price effect, particularly as influenced by public sector pay.
There is some ground for a mild degree of confidence and optimism in the recent teachers' settlement, of 7·5 per cent., and in the settlement for local authority manual workers. If such modest settlements in the public sector can be retained, that will go a long way towards helping us to solve the problem. In the long run, closer attention will probably have to be paid to limiting or more efficiently conveying the great amount of expenditure involved in open-ended and obligatory public expenditure. The difficulties will be great and will merit the closest attention by the Treasury and spending Departments.
What one Government can do, as opposed to another, is often asymmetrical. When the Labour Party was in power in the 1960s it should have dealt more bravely with the trade union problem. Only the Labour Party was in a position to tackle that problem and to make a new legal framework stick. On the other side of the argument, it is difficult for a Conservative Party, which is, unfortunately, not well represented north of a line from the Humber to the Severn, to cut severely that buoyant, obligatory, open-ended expenditure. It consists mostly of transfer payments and is a token of our strong commitment—which I applaud—to the principle of "One Nation" and to the idea that those regions and sections of the community that are in deep trouble should be supported during the recession.
The best way to restore a more healthy balance between current and capital expenditure is not to make a savage attack on current expenditure but to increase capital expenditure on necessary and viable projects in the public sector. I am not alone in thinking that. Recently, I tabled some questions on this subject. I received a helpful letter from the Federation of Civil Engineering Contractors. The secretary of the federation pointed out that opportunities exist for an increase in sensible capital expenditure on roads, sewers, rail electrificiation and telephone exchanges. Expenditure could also be made on energy conservation. All these things could be valuable to the community in a broader cost-benefit analysis.
If a narrow, short-term, accounting point of view is adopted it may be difficult to make those projects stand up


against others. If a broader view is adopted, and if the cost penalty to society of not carrying out such long overdue works is considered, it is easy to establish the wisdom of getting on with them while the going is good. How are we to increase the quality and efficiency of public expenditure? We could put more emphasis on those capital projects with the prospect of a good, discounted rate of return. More emphasis could also be placed on investment spending in general, including investment in training and retraining. All too often, investment spending is thought of simply as bricks and mortar, and the pouring of concrete, but our greatest natural resources are the skills and enthusiasm of the British people. We need only to channel those skills and enthusiasm in the right way.
My right hon. Friend the Secretary of State for Industry made a speech on industrial policy to the Bow Group some time ago. He said:
Certainly there should be scope in addition for some privately financed, risk-taking but potentially profitable investments in nationalised industries.
I entirely agree with my right hon. Friend. I hope that his Department, as the lead Department for British industry, will continue to press the Treasury on this so that we may find ways of boosting sensible capital spending at this time of deep recession.
We should not discount by any means our efforts in the public sector on training and retraining. This is a vital part of our effort to come out of the recession in good shape and in a position in which we can take advantage of a revived national and world economy. In this context the House needs to be deeply concerned about what it can discover in table 2.4.3 of the White Paper, which refers to the TOPS training programme. Here we find that only 67,000 people are being trained directly by the Manpower Services Commission under the TOPS training programme during 1980–81. A further 25,000 are being trained indirectly for the private sector, at a charge. That makes a total of 92,000, which, as I pointed out to my right hon. Friend the Secretary of State for Employment, is regrettably only about ⅞per cent. of the total working population.
I know that in a sense it is an unfair figure, because one should also take account of the Government's admirable efforts to help young people. There are now 440,000 opportunities for young people under the youth opportunities and other programmes in the years 1981–82. None the less, I return to my main point.
If we believe in investment and the quality of public spending, for goodness sake let us do more through the public sector agencies concerned for training and retraining, so that we shall be in a better position to take advantage of the upturn—that vital U-turn of which I spoke—when it comes.
I want to deal next with the efficiency of public spending. It will be necessary to change the ways in which we do things in the public sector if we are to have a significant effect in raising efficiency. I think that that will mean, for example, a continuation rather than an abdication of the so-called Rayner exercises in the public sector. It means that we shall have to re-examine some of the Whitehall conventions that up to now, in an effective and insidious "Yes, Minister" kind of way, have prevented the changes that we might make in the bureaucracy.
It will also mean that over a period the Government will have to begin eliminating some of the complexities and overlaps within our tax system. It is horrifying to do a little primitive arithimetic on the cost of our Heath-Robinson tax system in which all the reliefs and allowances to individuals, to industry and everything else totalled about £47,000 million in 1980–81. I base that figure on an answer that I received from the Treasury a short while ago.
We have, therefore, to tackle this problem. As I have said on previous occasions, we must move towards some form of negative income tax—a system in which the help that we give to our many deserving and needy people is based to a greater extent on cash and to a lesser extent on care. Behind those two words lie two different approaches towards helping people. It is much more consistent with our commitment to individual freedom to put greater emphasis on cash. If greater emphasis is put on care, that merely takes one into the trap of relative price effects in public sector pay and the provision of public services through increasingly bureaucratic organisations.
These, then, are among the steps that we need to take to increase the efficiency of public spending. We could put more of these tasks out to the private sector and see that less is done "in house" as they say. I can give examples from the public sector. One is the CEGB, and power station design. We could, to the benefit of the country, take some of the Board's research and development responsibilities out of the public sector and rely on contracts with the private sector. The same is true of local authority planning departments and of certain aspects of the activities of the Ministry of Defence, both of which are unnecessarily over-staffed for the purpose of some exercises.
Another idea, on which I am glad to see that my right hon. Friend the Secretary of State for Industry is keen, is finding more joint ventures between the private and public sectors so that gradually we can break down the over-simple divisions between the two and rely instead upon a permeability of the two sectors. That would be to the benefit of the whole economy.
We must therefore continue to control public spending overall within the limits of what the nation can afford. We must be cautious, however, about beguiling arguments that favour slashing current spending, particularly since 44 per cent. of the total is transfer payments on a statutory basis. We must restore what I would call the national investment priority, with more capital spending on a continuing basis, as France, Japan and others have done. If there were to be one long-term task above all others to which the Government ought to be committed, it is this national investment priority.
If we believe in the necessity of staying in power for 10, 15 or 20 years—as I hope we shall—that must be the priority task, and we must never cease to raise the quality and efficiency of all forms of public spending. We must not fall back into the trap of a dogmatic approach that sees public spending as bad, private spending as good, and everything else as incidental.

Mrs. Renée Short: I am sure that everyone on the Labour Benches will agree with the concluding remark of the hon. Member for Carshalton (Mr. Forman) that public expenditure should not be regarded as all bad. That applies particularly to public capital expenditure. I agree entirely with him that an


enormous amount of capital expenditure needs to be undertaken in important sectors of engineering and building. The hon. Gentleman referred to some of those, as have some of my hon. Friends, and I shall therefore not repeat them.
It seems incredible that the Government are prepared to sit back and allow such an enormous amount of our resources to be used up in paying nearly 3 million people and their families and dependants to be idle and to be supported by social security benefits which are far from adequate for their current needs. If we continue to use our resources in that way it will amount to an appalling policy.
Part of the job of the Select Committees is not to look at policy matters but to examine the White Paper on expenditure as it affects their Departments. The Select Committee on Social Services was pleased to see, in line with its recommendation last year, the reappearance of the table showing total expenditure by broad groups of beneficiaries on social security benefit. That is greatly to be welcomed. I hope that the Government will take on board our other proposals as well.
The table shows that by 1983–84 the supplementary benefit system, which is administratively very expensive—we drew attention to this—will be providing two-thirds of the income support of the unemployed. That underlines the Committee's concern that there should be a better, more coherent and more effective system of income support for the unemployed and their families. We hope, therefore, that we shall get a response from the Treasury on that.
Last year the Select Committee asked for an explanation of the rising number of people receiving invalidity benefit. The reply that we received suggested that an explanation for most of the increase is probably to be found in rising unemployment. This year's White Paper shows a drop of 20,000 in the number expected to receive benefit. In 1979–80 and 1980–81, about 50,000 claimed sickness benefit—about 9 per cent below expectations. That was the main reason for the reported
lower than estimated social security expenditure
in 1979–80.I wonder why there have been those unexpected and unexplained changes.
Then there are administrative costs. Last year the Committee criticised the way in which administrative cost projections were reached. I see that they are rounded to the nearest £10 million this year as against the nearest £100 million last year. Reductions in administrative costs are given as another explanation for lower than estimated expenditure in 1979–80. We do not yet know the whole story, but administrative costs are expected to grow in real terms, according to the White Paper, by over 11 per cent. from 1980–81 to 1981–82, while real benefit expenditure rises by 6·8 per cent. When we asked the Minister for Social Security to explain what then appeared to be a 10 per cent. rise in administrative costs between 1980–81 and 1981–82, he said that it reflected the practice of rounding to the nearest £100 million. He suggested that the real increase would be only about 4 per cent. I hope that we shall be told why the projected increase is now over 11 per cent. The figures are confusing.
The document "Care in Action" has already been mentioned. I am glad that the Secretary of State has accepted the strong recommendation in the Select Committee's report on perinatal mortality that maternity services and neonatal care should be given higher priorities than they have received in the past. I see that the Secretary

of State has added maternity services and neo-natal care to his list of priorities—which includes elderly people, the mentally ill, mentally handicapped and physically handicapped. The aim, of course, is to reduce the number of perinatal deaths and handicaps.
The document contains no reference to the costs or resources that are to be made available to those priorities. I do not know how anyone can know how those priorities are being observed and financed. Part of the difficulty is that although many health authorities have been asked to accept some of the Select Committee recommendations, there is no method of monitoring what the Department does or how it spends its resources. There must be a proper system of monitoring the Department's activities, how the resources are allocated, and whether the aims are being achieved. Without monitoring it is impossible to know.
We have repeatedly requested such a system. I hope that the Treasury will ensure that a good monitoring system is set up so that we may know where there is under-provision or over-provision. Such a system would be an important weapon in terms of public expenditure.
Members of the Select Committee returned yesterday from a visit to Scotland and Newcastle, where they saw the effect of the Government's proposals on medical education and the Health Service, and the training of and career structure of doctors. We took evidence in Newcastle from Professor Sir John Walton, the dean of the medical school, chairman of the education committee of the General Medical Council and chairman of the BMA. I am sure that no one in the House would question his credentials. We heard him give evidence in Committee on a previous occasion.
Sir John wrote a long letter in the British Medical Journal last week in which he described the appalling effects of the cuts in education on postgraduate institutions, including Hammersmith—probably the most important—and 13 other medical institutes where important postgraduate research is being carried out. He drew attention to the dangers that arise from insufficient money being given to teaching in academic establishments to the continuing detriment of research. He said that
buildings have deteriorated for lack of funds to repair and maintain them, and frustration and conflict have inevitably increased when different academic disciplines have been compelled to fight for every tiny morsel of new resource—or even in an attempt, often vain, to protect and preserve the resources, however inadequate, which they have built up painfully in preceding years".
Those are strong words. He used equally strong words in the evidence that he gave to the Committee.
The infrastructure has crumbled rapidly during the past three years. Sir John says that the new Government proposals
will dismantle it beyond repair. All around us we see in universities and in the Health Service alike able, well-trained, enthusiastic, and dedicated clinicians, many with the capacity and training to contribute effectively to new knowledge with consequential improvements in patient care".
During our visit we met some of those newly qualified doctors—many of them junior doctors, including many women—who were most enthusiastic and have much to contribute. But many of them have little chance of becoming consultants—and that will mean a decline in patient care—because of a lack of resources in the fight against killing diseases.
The Department has agreed, in conjuncion with the University Grants Committee, to an increase in the number of medical students—up to 4,080 by the mid-1980s. It will


mean further expenditure on medical schools, new buildings and an increase in academic staff. Considerable resources will be necessary, but by all accounts they will not be available.
The new medical school in Newcastle was designed for an annual intake of 200 students and it should be open within two or three years, but Sir John said that
there must now be very grave doubts about whether we shall be able to afford the funds to open and run it, let alone staff it.
How can the Government view that situation with equanimity? It would represent an enormous waste of human resources, equipment and materials. The university has been asked to increase its annual intake from 130 to 200, but that will require additional equipment and teaching resources.
The problems facing medical institutions in London will affect undergraduates, but the first effects will be suffered by postgraduates. The results of the Flowers report have been compounded by the increases in overseas students' fees, which have created an immediate cash crisis for many postgraduate teaching institutions. The London School of Hygiene and Tropical Medicine has been referred to and, as I told the Prime Minister recently, the Hammersmith school has lost almost £1 million in fees so far this year. A serious crisis is facing those important establishments.
If the difficulties continue, lecturers, readers and professors will be made redundant. Lord Annan told the Select Committee this morning that the academic staff of institutions have security for the whole of their academic careers. If they lose their jobs, large sums of redundancy pay will be demanded and, if necessary, court action will be taken to ensure that it is paid. That will be unproductive expenditure at a time when resources for important postgraduate institutions are being cut back.
We face the prospect of severe damage to the NHS—and its impoverishment. Patient care will be further eroded because the work of postgraduate institutions is aimed at improving patient care, curing what is now incurable and finding better methods of treating patients.
Provision has been made for a progressive reduction in expenditure on home students in higher education of rather more than the 8 per cent. below the previous planned level. The outlook is serious and the most seriously affected institutions are the postgraduate medical school at Hammersmith, the 13 institutions that are part of the Postgraduate Medical Federation and the London School of Hygiene and Tropical Medicine.
I hope that the Treasury and the DHSS will reconsider the resources that are being made available and will act quickly to avert the financial crisis in medical research. If we do not provide the resources for good teaching, research and academic work, serious inroads will be made into the NHS, training and patient care. London in particular, but Britain in general, is a focal point for good students who come here from all over the world to learn how we do things. They benefit from the medical work done here and there will be serious repercussions if the best students cease to come. At present they receive postgraduate medical training in this country and go back to their own countries, having learnt a great deal not only of medicine but of many other areas of our national

activity. The advantages that can flow through them when they are established in the professions of their own countries are immeasurable.

Mr. Anthony Beaumont-Dark: The debate reminds me of the saying of St. Augustine:
Give me chastity and continence, but do not give it yet.
In the round, everybody believes that we have to make this country more efficient and that ultimately it must pay its way, but a number of people do not believe that it should be done now.
Emotive phrases such as "assault on public expenditure" have been used about the Budget, but we are trying to tackle inflation, which is caused because we spend what we do not have, and I do not see how we can regard the expenditure of £10½ billion more than this country's great efforts earn as an assault on public expenditure.
My hon. Friend the Member for Carshalton (Mr. Forman) said, with great compassion and sincerity, which I respect, that we have to be prudent—I agree with that—and that we must build one nation. I hope that we all agree that public life is about speaking not for one set of people but for all.

Mr. Austin Mitchell: But not yet.

Mr. Beaumont-Dark: My hon. Friend also claimed that we must spend money that we have not earned on worthy projects
The hon. Member for Wolverhampton, North-East (Mrs. Short) made a good case for more money to be spent on medical schools. I get letter after letter from people who put extraordinarily good cases for more public expenditure. I could put forward such cases myself. The problem is that those who put forward the case for more public expenditure agree, in the same breath, that we must try to be prudent and sensible. The two attitudes do not tally. It is not being harsh to say that one can agree with both views, but one finds it difficult to agree with both at the same time.
Let us take the Civil Service dispute, which is a classic example. Worthy people tell us that they are concerned about the public services and unemployment and about the fact that others should not be hurt, but they will not be concerned just yet—not until their wage settlement is approved. They forget that public sector pay takes 30 per cent. of all public expenditure—the treasure that this country gets together in the course of a long and painful year. A recent report makes it clear that an increase of 1 per cent. on top of the 6 per cent. offered to the Civil Service would add £300 million to the level of public expenditure.
One does not have to be a great mathematician to calculate that a claim for another 6 per cent. means an additional £1·8 billion in public expenditure. The answer is to accept that £1·8 billion or to cut 50,000 jobs for every 1 per cent. that is obtained. Does anyone believe that 300,000 jobs could be saved? Of course, all those who are asking for another 6 per cent. are caring and concerned. They do not wish to cause unemployment or pain to others, but that will be the result of their action.
What was the result of Professor Clegg's activities? He is that wonderful academic with the whiskers whom someone foolishly asked to do a job because Parliament did not want to make a decision. He was asked to engage


in a comparability study. There is no comparability. However, the British people paid £2·4 billion for that exercise. There are many who are unemployed and who may be unemployed for a long time because of the compassion and concern that others have for their own abilities.
It is the people who are concerned. The waterworkers' settlement was disgraceful. The settlements in the gas and electricity industries are all disgraceful. Everybody is involved, or is supposed to be, in Britain. The cost of these settlements has to be paid by other people's jobs if Britain insists on spending what it has not earned.
I have said that some of the comments in the White Paper are pious nonsense. They are pious nonsense because they state the obvious. We all want more capital spending instead of current spending. That is blindingly obvious. It is much more difficult when we get down to the nitty-gritty of how it is to be done. Everyone agrees that we want to spend more on capital. It is said that that is worthy spending, and so it is. It is said "Let us spend £2 billion now and we shall save it later. We shall cut out jobs here and there." In local government it is easy enough to do the one, but the other is not often done. Therefore, one ends up with the worst of both worlds.
Let us take British Rail as an example. Sir Peter Parker talks rightly, splendidly and sensibly about what is needed for British Rail. It seems that a modest £5,000 million will be good enough if stretched over five or six years. Those concerned with the management of British Rail have failed miserably on staffing. The unions know what should be done. The British Railways Board knows what should be done. The only thing on which they can agree is to get more of their feet and toes into the public trough. They cannot agree on how the money is to be found except that it must come from the mythical and hard-pressed taxpayer. That means, nearly always, that productive industry becomes less and less productive.
My own party had a go at reorganising the Health Service in 1974. It was splendid and sensible to have the vision of a better-run Health Service. We spent a little more on hospitals but we spent far more on setting up new regional authorities. There are now 23,000 more administrators sitting upon the back of the Health Service than there were 10 years ago.
I share the compassion and concern that the hon. Member for Wolverhampton, North-East spoke about when referring to medical schools. However, the Health Service should look to itself in deciding and remember those extra 23,000 people. When the PSBR becomes frightening there are those who say "Let us think of another way in which the money can be found. Let us get it from the private sphere." What are we talking about? The assets belong to the country. There are those who say "Let us take the best, borrow thousands of millions of pounds and leave the country with the worst." Those thousands of millions of pounds come from the same pockets. There are not two sorts of pocket. We are not magicians. We should not look around us and ask who created the world in seven days. All that can be said about politicians is that they can ruin it in seven days.
It is the people who have to earn the money. Every person who is not producing has to be financed by somebody who is or who can. That leads to inflation. The Government are right to concentrate upon inflation. All the problems that concern us in society, whether they be to do

with Civil Service pay, medical schools or the universities, come about because inflation has become the great evil that defeats all our hopes of a better future.
The "Crossman Diaries" make interesting reading. We learn from them that Lord George-Brown, as he now is, attended a Cabinet meeting and said to the Prime Minister "I have some awful figures to announce tomorrow. Inflation will he over 3 per cent." I believe that Lord George-Brown was right. We are now saying that we hope for a great victory and that we may be able to reduce inflation to single figures. It will not be a great victory if we achieve 9 per cent.
Britain's prosperity will never be able to grow until we accept that the idea of doubling one's income over seven years, which is what 10 per cent. means, and increasing production by 1½ per cent. over virtually the same period, amount to the economics of bedlam. Britain must gel its sense of realities right. If that is achieved, it has a hope of prosperity. Prosperity will not come on the back of oil. The last boom that Britain had was backed by oil costing $3 a barrel. We are now talking about $43 a barrel. My friends in the oil industry say with confidence that they expect it to be $100 a barrel by 1990.

Mr. Austin Mitchell: Is that four-star?

Mr. Beaumont-Dark: It may be amusing to ask "Is that four-star?" It may mean that the Western world will be committed not to a great growth programme but to a low growth programme. Every time that the Western world starts to increase its prosperity the Arab countries, which do not need the money, will increase the price of oil. I do not blame them for that. That is an economic fact.
Anyone who thinks that the Western world is merely passing through a difficult phase is wrong. We are heading for a time when Britain and other countries will have to be far more realistic. The Government's plans are not politicians' plans. If they were, they would be wildly optimistic. If the Government were putting forward such plans they would be telling the British people of an easy world tomorrow or the day after. That will not happen. Britain will have to earn its own way in the world. There are those who say that because we have oil we have a great future. Oil merely gives us a great opportunity to restructure our industry. It gives us a breathing space and allows us to ensure that something will be left when oil has gone. In the end, as we say in the North, someone has to pay the tallyman. Britain has lived on tick, hope, borrowed time and lost opportunities for as long as I can remember. Successive Governments, Conservative and Labour, have sacrificed the long term for the short term since the war. The short term is always easier. The long term is always the responsibility of someone else. The long term is now.
We should accept the problems and anguishes of unemployment. It is an agony for those who think about it, and an abomination for those who suffer it. Anyone who thinks that we look to 2½–3 million unemployment as if it were a virility symbol fails to understand that all of us feel that it is a tragedy. A greater tragedy would be to try quickly to spend one's way out of it now, ending up with no long term.
The policy which we have put forward is grim, but it is hopeful in the sense that it is realistic. If we grapple with that realism this country will have a future. Whether we


have the courage and the resolve is what all the debating is about in the end. I believe that Her Majesty's Ministers have that courage and resolve. I stand with them on that.

Mr. R. B. Cant: We have listened to the rambling sayings of almost pre-economic Neanderthal Man.

Mr. Beaumont-Dark: Is that Lord George-Brown?

Mr. Cant: I do not propose to take up any of the hon. Member's points. I was going to say something mildly in praise of the speech of the hon. Member for Carshalton (Mr. Forman), but in case that may be interpreted as the kiss of death I had better desist.
However, I shall pick up some of the points that the hon. Member for Carshalton made. He made some rather perceptive comments about local government finance and capital and current expenditure. That reminded me that I am about to stand in the county council elections in Staffordshire. I am certain to get in. The Government have completely dismayed the poor old Tories in that great shire. Sometimes central Government politicians should think a little more about what they are doing to local government. They were helped a little with the rate support grant, but they made themselves extremely unpopular with the cuts. The final insult that will guarantee them defeat throughout the shire counties, apart from the Metropolitan counties, is the Budget.
The hon. Member for Carshalton stated on two or three occasions that we are all—that was a mild concensus between the Government and Opposition Benches—praying for an upturn in the economy. I read an article in one of our great Tory weeklies over the weekend. It was headed:
Where the Hell are we anyway?
I thought that that was not the sort of language that one should use in the Chamber of the House of Commons, and perhaps it should not be used in The Economist.
The Governor of the Bank of England used more elegant language before the Select Committee. He said:
A question which economists find very difficult to answer is where we are now.
I thought of all the surveys that I had pretended to read and understand, all the forecasts based on thousands of simultaneous equations of one sort or another, the leading indicators, which I find most fascinating of all—the longer leading indicators, the shorter leading indicators and the coincident series—and finally, the real evidence—the Chancellor's talks with real men. I can only assume that that is a sort of counterpart to the real economy of my right hon. Friend the Member for Leeds, East (Mr. Healey).
It is difficult to say what is meant and whether we are about to take off, as the Chancellor would have it. We used to say that it was all a battle of figures or words, but now it is a battle of letters. We might belong to the V upturn school, which means that one is a professor of monetarism at Liverpool university and that one believes that we are going right down and right up. We might be a member of the W school, in which case one goes down, then there is a recovery, then one falters and perhaps later there is another recovery. We might be a member of the U-turn school, which suits my mentality better. One goes down and one goes up. As my hon. Friend the Member for

Grimsby (Mr. Mitchell) said, the most fashionable school of all is that which believes in the hypothesis in which one slumps and remains at the bottom of the trough.

Mr. Austin Mitchell: Bloody "L"

Mr. Cant: I could not say that, as it would be unparliamentary language.
We do not know where we are, and the Government do not know how we shall get out of that situation.
We have had some interesting discussions, which show great insight and knowledge. However, if we ask ourselves whether, here and now, or at the end of the year, or at some time in the first quarter of 1982, we are going to have that delightful experience of upturn in economic terms, we must say, as Keynsians, that we should consider the components of aggregate demand.
It is no good saying that there is any future prospect of an upturn unless one can see positive movement. The Treasury says that investment in the private sector will fall by only 1½ per cent., but everyone else says that there will be a slump. Therefore, in what way can one say that here is something that will give us a vehicle for revival?
We should consider stocking and destocking. We know that the destocking between 1979 and 1980 knocked off 4 per cent. from our GNP. However, the Treasury would like to say that it has destocked at such a rate that manufacturing industry will start stocking again and that stocks in commercial shops will be normal, and so on. In manufacturing industry the process of destocking has not finished—that is the opinion not of the Treasury but of the people who know. It will not finish until the autumn. That is because manufacturing output has fallen more rapidly than destocking has taken place.
I was at a conference in my constituency yesterday at which someone was saying how proud—he was a member of the Establishment, of course—we should be that exporters, despite the pound, interest rates and the world recession, had maintained exports in 1980. He built up a picture of that being maintained in 1981, but we forget the extent to which exports were maintained precisely because, although our oil exports rose only by 2 per cent., oil prices rose by very much more. It was the oil content of exports that maintained the buoyancy. The hon. Member for Knutsford (Mr. Bruce-Gardyne) shakes his head. He is much more learned than I in these matters. Perhaps I should withdraw that statement, but I shall leave it in just in case it is right.
Exports this year are already beginning significantly to fall off, although manufacturers are exporting at nil profit because they are desperate to hang on to the market. There is no prospect of exports being the magic catalyst that will revitalise the economy.
Let us consider the great unknown quantity of personal consumption. The Tories tell us that people who have kept their jobs are much better off because incomes have increased. To some extent, that is right. Many of the apparant paradoxes to be found in an in-depth analysis of the British economy can be explained in those terms, but two things are significant. First, there is a cycle in personal consumption, and we are moving into that part of the year in which it is depressed. It is likely to revive only from the autumn onwards. Therefore, how can it be argued that from personal consumption will come the drive that will get the economy going again?
The Liberal spokesman referred to the personal savings ratio, which is one of the most interesting facets of the


British economy. The norm increased from 4 per cent. to 8 per cent., and even that figure was twice that of the United States. In the last quarter of last year the personal savings ratio swept up to 16 per cent. There is a difference between the gross personal savings ratio, which is the one normally quoted, and the net personal savings ratio, but the latter has also significantly increased. If, because of the uncertainty of the future, people who can afford it continue to save in that way—and I know that the Treasury says that they will not, but that is the strongest argument for believing that they will—it is wishful thinking to see personal consumption as a dynamic component of aggregate demand.
Relatively speaking, I am of monetarist persuasion, much to the disgust of my hon. Friends, but the Government have made nonsense of monetarism.

Mr. Austin Mitchell: Without criticising my hon. friend's stance as a monetarist, may I ask him to accept that the relationship between monetarism and the Government is much the same as that between the Moonies and religion?

Mr. Cant: I should not like to comment on that, but I recall what Professor Galbraith told us when we assembled in a room upstairs—that never since Stalin embraced Marxism have a Government embraced an economic religion in the way that this Government have embraced monetarism. There is an element of religious fanaticism in their attitude.
The Government have gone well beyond any measures that a sensible monetarist would wish to apply. They have converted me to Keynesianism. When they can view with a measure of calculated complacency unemployment reaching 3 million they should consider whether it would not be preferable to embrace the most primitive Keynesianism—getting people to dig holes and fill them in again. A growing body of people believe that it is time to call a halt when the PSBR is being greatly increased by the loss of taxes and the benefits having to be paid out for unemployment. The PSBR, net of the unemployment factor, is far too small. If public expenditure rose and we approached full employment once again, the increase would be cancelled out by the reduction in the money lost by unemployment.
The argument about financial crowding out is nonsense. A further increase in public spending will not increase the PSBR, make it difficult to finance and so increase interest rates. We have the necessary money, whether in institutions or in individual savings, and we can devise the necessary instruments. The Government are on the road already, with index linking. Everybody is an old-age pensioner over the age of 50. Index-linked gilt securities, plus 2 per cent., are a marvellous idea. Without raising interest rates there are plenty of ways to find money for an even bigger PSBR. If the Government do not do so it will be difficult to maintain the relaxed, democratic way of life which, through the past decades, we have become used to.

Mr. John Bruce-Gardyne: The House always enjoys the contributions of the hon. Member for Stoke-on-Trent, Central (Mr. Cant), and tonight was no exception. Over many years he has demonstrated that there is nothing remotely party political about a monetarist

approach to economic affairs, so I was a little concerned to hear him say that he was returning to Keynesianism—but, of course, Keynes was a monetarist, as my hon. Friend the Member for Carshalton (Mr. Forman) has just pointed out to me. I believe that it is his latter-day disciples who over many years have betrayed much of the sound sense that Keynes himself taught in the 1930s. I am therefore not sure that the hon. Gentleman is making such a great transition as he would have us believe.
The hon. Gentleman also complained that neither the Government nor, indeed, anyone else, including the Governor of the Bank of England, seemed to know precisely where we were. I suggest that we never do, and perhaps we never can. I remember that many years ago Harold Macmillan complained that we were always trying to run the British ecomony on last year's Bradshaw. Ever since then we have been trying to find a bigger and better guide. There is no evidence that in the course of that search we have demonstrably improved our techniques for managing the economy. I suspect that it is impossible even for the greatest collective wisdom that can be assembled to be sure at any given time precisely where the economy is.
If I had reservations about the recent report of the Treasury and Civil Service Select Committee they would be very much connected with that point. My colleagues expressed the courage of their conviction about the course of future events which, much though I admired it, I felt too timid to endorse.
We have a one-day debate per year on public expenditure compared with six days on the Budget. When we debate the Budget and the Government's fiscal proposals the House is usually fairly crowded and the attendance is good. When we debate public expenditure we should be in difficulties if we needed a quorum. I make no criticism of that; I merely note the fact. It follows that in discussing the reform of Supply procedures, as another Select Committee is doing at present, we should be aware that, for better or worse, the extent to which the House is prepared to concern itself with Supply and public expenditure is perhaps not very great. We should therefore not exaggerate the scope for such debates. I greatly regret this, because I believe that we are sent to this place to vote Supply against redress of grievances and that we should pay far more attention than we are prepared to pay to the processes of Supply. Nevertheless, we must face the fact that, in general, we are not.
Reference has been made to the report of the Treasury and Civil Service Select Committee. Like the hon. Member for Oldham, West (Mr. Meacher), I am a new boy on the Committee, and new boys should show respect for their elders and betters. I must confess that I was not one of those who believed that the reforms in Select Committee procedure introduced by my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) would necessarily redound to the benefit of the House or the better management of our affairs. At that time I feared that the new Select Committees, attached as each would be to an individual Department, would become the captive balloons of the respective Departments. I freely admit that that charge could not possibly be levelled against the Treasury and Civil Service Select Committee. In so far as I had made that supposition I was totally wrong.
I was also concerned about the load which the new system of Select Committees would place upon Ministers and the Government machine. In that respect, my concern


remains. In the course of our latest inquiry, the Chancellor of the Exchequer and the Governor of the Bank of England each appeared before the Committee for two and a half hours. It is for the House to judge whether the evidence that we obtained in the course of our inquiries has substantially assisted the House in its deliberations and its appreciation of the Government's expenditure programmes.

Mr. Robert Sheldon: rose—

Mr. Bruce Gardyne: I shall give way to the right hon. Gentleman in a moment.
I believe that all Select Committees need to consider the demands that they place upon the Government machine. It is not merely a question of the amount of time that Ministers or officials have to appear before the Committee; it is also the extensive burden of additional preparation work which must be done beforehand. I accept, of course, that if it can be shown that this leads to more effective government of the country and more effective answerability of Government to the House it is well worth while. But, on the basis of our experience to date, I am not sure that it is.

Mr. Sheldon: rose—

Mr. Bruce Gardyne: If the right hon. Gentleman will allow me to conclude this section of my remarks, I shall wilingly give way. On the basis of experience of Select Committees to date I am not at all sure that we can come to that conclusion.

Mr. Sheldon: It is surprising to hear such remarks from the hon. Gentleman, as he is a member of two Select Committees. To my knowledge, he was not forced to become a member of either. Indeed, I remember objections coming from all parts of the House to his membership of the Treasury and Civil Service Select Committee. I cannot understand why he tried so hard to become a member of a Committee which he now regards in such a half-hearted manner.

Mr. Bruce Gardyne: That comment is unworthy of the right hon. Gentleman. The short answer—and I do not propose to take long on an intervention of that kind—is that I did not try very hard. As the right hon. Gentleman should know, the Committee of Selection made a choice. It asked me whether I was agreeable to my name going forward, and I agreed. One of the reasons why I felt that I should agree was precisely that I had been a public critic of that Committee. I feel that if one is a public critic one has some obligation to serve in a capacity if one is asked to do so. Had I not been a public critic of the Committee I should have been more reluctant to do so. The right hon. Gentleman might save us that type of intervention.
I wish to consider one aspect of the Select Committee's report which I believe is germane to our discussion, but about which we have heard little so far. I refer to the significant reservation that the Committee rightly expressed about the likelihood of fulfilment of some aspects of the Government's public expenditure programme. The hon. Member for Fife, Central (Mr. Hamilton) drew particular attention to paragraph 19, in which we referred to what by current standards one might describe as the remarkable modesty of the profile of commitments to expenditure on the industry and

employment programmes set out in the public expenditure White Paper. The hon. Gentleman's quotations were highly selective. He totally ignored the concluding sentence of that paragraph, which states:
In our view it is probable that further expenditure will be approved which cannot be wholly accommodated from the contingency reserve.
That is the point.
I refer also to reservations which the Committee expressed—I believe rightly—about the relative price effect and the Government's expectation of the relative price effect. The Committee wisely suggested that there were substantial reasons for doubting whether the Government would find it all that easy to adhere, on present programmes, to the PSBR which has been set out in the Budget.
There are some other comments in the report—with which I was not so easily in agreement—about what was suggested to be the excessive emphasis that the Government appear to have placed on the PSBR as a target. As the Committee has pointed out, and as we know well, the range of error in the PSBR has been substantial. Those who argue that we could have safely assumed our ability to finance a substantially larger PSBR on a declining rate of interest in the year ahead are giving a substantial hostage to fortune.
If our experience in the coming year with the PSBR were to be at all in line with our experience in the past year—in other words, if there were to be something like a 50 per cent. overshoot again—I do not believe for one moment that that is the sort of figure that could be financed on the basis of a falling level of MLR. On the contrary, it would almost certainly lead to the need for a significant increase in the MLR.
Because of our understandable concern, with the Chancellor of the Exchequer's projection for the PSBR on Budget day, we are always in danger of overlooking the distance that is sometimes travelled—and could be travelled again this year—from the forecast figure to the outturn figure by the time the year is out.
I draw attention to one other reason for concern about the size of the PSBR in the year ahead, on the other side of the ledger. The Red Book tells us that the Government are expecting to achieve an increase of about £4,000 million in Customs and Excise duties in the year ahead, having missed by about £2,000 million their objective for the Customs and Excise duties revenue in the year that has just ended. Much of the shortfall in that year was related to a shortfall in VAT payments which may well not be repeated, but I am extremely sceptical about the likelihood of the Government raising, as they intend to do, an extra £1,000 million this year from taxes on tobacco and alcohol in the depths of the recession. I do not believe that that money will be forthcoming, and the latest news from the tobacco industry tends to support that proposition.
My hon. Friend the Member for Carshalton said that those Conservative Members who argue for the need for retrenchment in public expenditure programmes have some obligation to be a little more precise. I entirely agree with him. It is very easy to be in favour of retrenchment in public expenditure in general but rather against it in particular.
I should like briefly to make one or two suggestions to which I would be prepared to affix my personal standard, for what it is worth. First, I wonder whether we should have a moratorium on recruitment to administration in


both Government and local authorities, and in the Health Service, for a period of at least six months, and possibly longer. It was tried in 1979 and I suspect that it should be repeated. I realise that it would create substantial inefficiencies, but it would also create substantial savings. We might be amazed to find the number of jobs that did not need to exist.
Secondly, we must look rather closely at the defence budget. We came to power committed to an expansion of the defence effort. That k in the course of achievement and we all welcome it. That is what we were committed to and it was right that we should fulfil that commitment. But that does not mean that we can exonerate the Ministry of Defence—and apparently the Ministry of Defence alone—from the regular rule that if cash limits are overspent in one year they must be recovered in the next.
There was an overspend of £470 million by that one Department in the year just ended—an overspend that we are told was due to the fact that goods and bills were delivered early. If they were delivered early, how can they arise again in the year ahead? There must he a countervailing reduction in the cash limit in the year ahead. I should have liked a more specific assurance on that point from the Chancellor of the Exchequer and others than we have had to date.
In the same context, we shall have difficulties if we are to continue to say that in the case of Armed Forces' pay—and Armed Forces' pay uniquely—some weird and wonderful system of comparability shall apply when, in my judgment, it has been rightly withdrawn in other sections of the public service.
We must act to ensure that the contribution from general taxation—which, incidentally, for reasons which I do not understand, does not appear but should appear in the public expenditure White Paper—to the sustaining of the guaranteed pension arrangements of the public service is absorbed into the contribution that the public service is called upon to make. The Scott report said clearly that the Government Actuary's conclusions on the value of index linkage were far too low. That is something that we ought to correct.
This may seem a small matter, but where really flagrant examples of wasteful expenditure are discovered heads must roll. We have had recently the glorious example of pot plants to the value of £73,000 being ordered for some wonderful new extension to the Welsh Office in Cardiff. There was even £20,000 for gardeners to dust the things. Ministers cannot be expected to identify something like that and knock it out in advance, but when it is identified we must ensure that somebody's head rolls. I submit to the Minister that it would do more good than many other steps that we could take if we suggested to the head of the Property Services Agency, who should be responsible for this sort of thing, that he might find gainful employment elsewehere in the economy.
I should like to mention briefly the topical and fashionable subject of capital investment in the nationalised industries, to which the Chief Secretary to the Treasury devoted an important part of his remarks. I shall read them with care tomorrow morning; it may be easier to absorb them in that way. It has become fashionable to say that none of us believes in vast overspend on current programmes, and that we must get public expenditure under control, but we should wake up to the fact that there are opportunities for productive investment in the public sector from which the private sector can also benefit.
My right hon. and learned Friend drew attention to some of the genuine problems—it is no good trying to pretend that they are some sort of Treasury shibboleth—in trying to get elements of public expenditure out of the PSBR and to finance them as if they were forms of private investment. I go one stage further than that. Do people such as my right hon. and learned Friend the Member for Hexham (Mr. Rippon) really believe that we can ensure a handsome, profitable, commercial return from investment in the railways when the daily mileage of the average freight crew on British Rail is 11? These are British Rail's figures. Does anyone seriously believe that, against that background, investment in the freight services of British Rail will produce a commercial return? The same is true of British Airways—the most over-manned airline in the world, by a long margin. Does anyone believe that investment in British Airways on that basis of staffing will produce a commercial return? I do not.
I hope that before we plunge overboard for the simple argument that all those wonderful schemes for capital investment are being held up only by the obscurantism of the Treasury, we shall care fully consider the record and performance of the industries into which it is suggested the investment should be ploughed.
The Government will probably need to take action to restrain significantly further their expenditure programmes in the year ahead. We should remind ourselves and all our colleagues on the Front Bench in charge of great expenditure Ministries that one of our key commitments when we took office was to ensure that the proportion of resources pre-empted by the State was reduced over the lifetime of this Parliament. We have a long way to go in that direction.

Mr. Austin Mitchell: I do not propose to follow the lengthy speech of the hon. Member for Knutsford (Mr. Bruce-Gardyne) because I shall doubtless have the opportunity of reading in next week's Sunday Telegraph, with some deterioration in style and grammar, that which I have not already read in past issues of the Sunday Telegraph. If the hon. Gentleman went into the Treasury and Civil Service Committee with his proclaimed views on the inadequacy of the Committee, his contribution would be likely to be a self-fulfilling prophecy, because I see from the report that he has become a built-in majority of one in that Committee. Presumably he is an aid to its progress and deliberations.
The public expenditure document, although disguised as a White Paper, seems essentially a cross on which both the country and the Government will be nailed over the coming year. The country will be nailed to it because the consequences built into that White Paper are a further steady and inevitable deterioration in the already shoddy education, health and other public services. A futher deterioration is built in, and with it a betrayal of many promises that the Government have been holding out over the past few months, with a new look in one sphere, a new think in another, and more spending in yet another.
The White Paper is a cross for the Government because it is a recipe for further continuing conflict, more battles in the Cabinet over cuts, more disunity and more bitter arguments in a Cabinet that is already bitterly divided over economic policies.
Even worse, the whole structure is built on shifting sands, if not mud, because it is based on an optimism about


the economy over the next few years which it is difficult to share on the basis of the material that the Government are providing. Sam Brittan, in this morning's Financial Times, says that the bottom of the recession has been reached, so presumably it is on the upturn. That is an argument for believing that it will go further down. He has been so wrong in every prediction that he has made so far that he seems certain to be wrong about that.
It is inevitable for Governments at this stage of the game to go through an "operation optimism" because having got themselves into the mire they have to pretend that they are there for some purpose; that the experience is beneficial and that good will come of it. But it is essentially a pretence, because all the common-sense factors indicate a further decline, rather than a recovery, and suggest that if the Government are prepared to build a structure like this White Paper on their own false optimism it will create difficulties for the Government and for the country.
There can be no recovery. No situation is so bad that it cannot be made worse by a few well chosen words from the Chancellor of the Exchequer, who is rapidly becoming "yesterday's sheep" in his standing in the Government and in the country. If the economy is to be savaged as it has been by yesterday's sheep, further disasters are in store. Common-sense factors imply that further decline is inevitable. The recovery which is built in to the assumptions in the White Paper will not take place, especially now that investment in Britain, in private firms as well as public institutions, has been slashed.
We are eating the seed corn at an amazing rate. There is no future in that procedure. In a competitive world that has become colder and harder over the past two years, competing economies which have been investing are still growing and improving their productivity while our productivity is declining. Despite the claims about one firm producing a miracle in a garage somewhere in Sussex and the mini-miracle and two-man bicycle operation in Yorkshire, the overall trend is for business and productivity to continue to decline. It has declined 7 per cent. since the Government's first Budget. That compares with the increase of 16 per cent. at the end of the Government headed by the right hon. Member for Sidcup (Mr. Heath). All this time our productivity and investment is sliding disastrously, but others are still investing and still growing. We have to face that competition in an extremely bitter and difficult situation in the months and years ahead.
The lackadaisical, outdated firms are not the first to go to the wall. It is the most efficient firms that are under the most severe pressure. By definition, they are the firms that have increased their efficiency to the maximum. They have trimmed their labour force in advance of the depression. Those are the firms which, because they have sought to build up their market share at the expense of profits and because they have had to borrow, are now thrown into disaster by the economic policies of the Government. They are the firms that are more exposed than many others to the pressures that the Government have created.
We are building up a scenario with closed capacity and the bottlenecks which are inevitably being created from that closed capacity in which any expansion will be inflationary. Because the Government have made such a fetish of their so-called triumph over an inflation that they

have generated they will not be able to expand the economy, because any expansion has an increase in inflation implicit in it. Any improvement must mean higher prices and higher profits. Higher profits will provide the investment that British industry desperately needs. So any expansion will result in inflation and the reversal of the Government's central objective.
The main problem is caused by the over-valuation of the pound. There has been a certain amount of glee in business circles and the press about the slight fall in the valuation of the pound in the last few weeks. The hon. Member for Enfield, North (Mr. Eggar) referred to the Brittan brothers. Perhaps he should have referred to the ancient Britons in terms of their economics, because in his column in the Financial Times Sam Brittan defends all that is most harmful to this country's real economy and all that is favourable to the interests of finance, which are contrary to the interests of industry.
In this morning's Financial Times Sam Brittan says that the sterling exchange rate index has fallen by 5½ points from its January high. He says that that is enough to give some encouragement to exports. He wants it both ways. Sam Brittan has been telling us for months, if not years, that a rise in the value of the pound has no adverse consequences, but now there are beneficial consequences attached to a slight fall.
The fall is far too slight to outweigh the enormous appreciation in the value of the pound in the last four years. Last year alone it went up by 12 per cent. in nominal terms and by about one-fifth in real terms, allowing for the higher rate of inflation in Britain compared to that in competitor countries. This is the fourth year in which the pound has appreciated. That scale of appreciation has occurred in no other advanced industrial country on such a prolonged scale at such a level since the war.
These consequences must be disastrous. The consequences take not months but years to feed through. They will accelerate the downward pressure which is built into the deflationary spiral that the Government have created and will invalidate the assumptions on which the White Paper on public spending is based.
Our share of world trade fell in 1980, despite the Prime Minister's claim that it increased. That was at a time when world trade was expanding more rapidly than it had for some time. Firms are holding on to export markets without profits in a desperate attempt to keep their market share and the markets. That is a finite process. They can go on only for so long. They are becoming desperate. Disaster lies ahead in exports. The disaster will be far bigger than that which the Treasury forecasts. The world is more competitive. We race in that world with an enormous ball and chain attached to our leg because of the over-valuation of the pound.
A similar threat is bound to come from imports. When the destocking operation is over who is to say that restocking will benefit production here. Imports stand ready, competitively poised and attractively priced because of the over-valuation of the pound.
Professor Galbraith suggests that Britain is an experimental house for monetarism and that an experiment on the effectiveness of monetarism is being conducted here. That experiment is already over for practical purposes. The real experiment is on the exchange rate and the effect that it has on the economy and on the competitiveness of British industry. We are going through that this year. The consequences will be disastrous,


because industry will be strangled by an exchange rate which effectively is a tax on our exports and a subsidy to our imports. They are imposed by the Government's policies. That must result in higher unemployment, in reinforcing the slide into the depression and a greater need to rescue bankrupt firms. It must lead to more spending on the nationalised industries. The Government are already presupposing an impossible turnaround in the finances of the nationalised industries.
The Government will be locked more firmly into the disaster of their own creation. We shall need more money, more borrowing and probably more taxation to finance the depression, the unemployment and the adverse consequences of the decline of the economy that the Government have created on nationalised industries.
The Government will not even be able to fulfil the limited objectives on public spending in the White Paper because of the depression which they have generated and which will be reinforced by the over-valuation of the pound which they have tolerated. That, in itself, creates the seeds of disaster in terms of public spending. The only solutions are the obvious ones of bringing down interest rates and borrowing more. The Prime Minister, while denying the feasibility of this approach, has demonstrated that it is possible by increasing the public sector borrowing requirement and, at the same time, bringing down interest rates by 3 per cent. It is a process that can, and must, be pursued further.
There is not a problem at the moment of the crowding out of private borrowing by Government borrowing. This is because the private economy is so under-run and slack. If borrowing by the Government is spent on stimulating the economy it pays for itself by creating employment, producing tax revenue and stopping expenditure on unemployment benefit. [Interruption.] I can supply the Financial Secretary with the calculations if he would like them. The right hon. Gentleman sits in his place saying "Rubbish," but the calculations are clear.
Borrowing spent in stimulation of the economy can pay for itself. It is crucial that the Government, if they are to be able to maintain public spending, should tackle the central problem of the pound sterling and the exchange rate that they have created. The importance that the Government have attached to the valuation of the currency and the interest rates that they have imposed on the economy are among the main pressures producing the over-valuation. This becomes a self-fulfilling prophecy. Multinational companies or countries with oil surpluses that bring their money into this country get not only high interest rates but an appreciation in the value of the money that they bring, to the ruination of industry and the British economy.
By reversing that self-fulfilling prophecy and selling pounds on the future market the Government have the power to bring down the exchange rate to the level that they want. They dare not do so, due to their fetish about inflation, effectively admitting that they are strangling British industry to gain minimal success over inflation.
Another necessary policy is the expansion of the money supply. The relationship between the economy and money is far more complex than the crude, simple caricatures that the Prime Minister and the Financial Secretary have given. The relationship is like a plant to water. The plant draws in the money, or the water, that it needs. What is now happening is that because the money supply has been too tightly controlled by all measures except M3, the plant, or

the economy, is withering. The only way to revive the plant is through an increase in the money supply. An increase can only be beneficial.
Money, even printed money, created now, effectively does one of a number of things. It allows the Government to bring down interest rates because it permits the Government to fund their public sector borrowing requirement, if necessary, by printing the money. Secondly, the money is spent stimulating this economy, assuming that the pound comes down to benefit British industry and the British economy. Thirdly, it is saved at an increasing rate, in which case it helps to bring down interest rates, because more money is available to be borrowed. By the law of supply and demand, therefore, the interest rate comes down. Or it goes overseas to bring the pound down further.
All these effects are beneficial to the economy, as it is now. Given the scale of under-employed resources. thanks to the policies pursued by the Government we have an under-employment of about one-quarter, or perhaps more, of our real resources. So this expansion can only be beneficial, by increasing output and productivity, expanding the economy and producing all the financial benefits that spring from such a situation. The Government have been saying for far too long—it has become almost a mantra—that there is no alternative. There are, in fact, several alternatives. Any of these would be better than the policies now being pursued. The Government are preaching a morality, not a system of economics and not any system that is proved or observable. They are preaching a morality which is particularly beneficial to those who have wealth, to financial interests, and to the City of London. The sacrifices countervailing those benefits are imposed on the poor, the less well-off, the working class and industry. That is the essence of what they are doing.
The Prime Minister may see herself as an economic Churchill compared with previous Prime Ministers who have been economic Chamberlains. However, there is no rationale in proving to our people that they are living beyond their means if by doing so we cut the means as disastrously as the Government have. The decline in industrial output has been greater than that which took place between 1929 and 1931 at the height of the Depression. Since this Government came to power almost one in eight industrial jobs has been lost. That is a disaster, and a direct consequence of the morality implicit in their attitude.
There is an assumption that previous economic policies have not worked. However, the record since the war has been one of steady growth, although slower than many competing economies. Certainly, there has been an improvement in our well-being and standard of living which seem to be denied by the Prime Minister.
Implicit in the inevitable decline which is built into the assumptions in the White Paper is the fact that every month's delay in reversing these disastrous economic policies means more borrowing and taxation to pay for the consequences of the Government's own " Depression." It also makes the jolt which is necessary to break out of the spiral of depression and decline even greater. Indeed, it necessitates a degree of what the Prime Minister might regard as Socialism. It will need the power of the State to rescue our economy from the disastrous mess which the


right hon. Lady has created. The use of that will need to be more liberal and generous for each day of delay that occurs.
The Government say that there is no alternative, but in other times when situations were bad, though not as bad as ours, the kind of policies that I have outlined have produced real benefits. I shall not quote the lessons of the expansion which took place under the premiership of the right hon. Member for Sidcup. Instead, I quote the experience of the National Government which came to power in 1931. By 1932 they had effectively devalued the currency by 35 per cent. and imposed a 10 per cent. tariff on manufactured imports. As a result, a deficit in manufactured trade was turned into a surplus and interest rates came down to 2 per cent. There was an expansion of the money supply which was enormous for the time, but there was no increase in inflation. In addition, real manufacturing output, which is what counts, went up by 64 per cent. In seven years, unemployment was halved.
That was the consequence of pursuing the policies which I have advocated. That gave us a better industrial record in the 1930s than either Roosevelt's "New Deal" or Hitler's Germany. Methods which have worked before will work again, but each day's delay makes the scale and toughness of the job greater and the effort much more exhausting.

Mr. Edward du Cann: I hope that the hon. Member for Grimsby (Mr. Mitchell) will not be embarrassed if I tell him that I agreed totally with the thrust of his objective. However, I disagreed substantially about a number of the remedies that he proposed.
First, I should like to draw the attention of the House To paragraph 22 of the White Paper, which states:
The improvement of efficiency remains a high priority.
That is efficiency in the form of public expenditure, which is the crux of the matter. The paragraph continues:
Severe restraint on public spending, the setting of strict cash limits, and reductions in civil service numbers all contribute to this objective.
Then there is a piece about the scrutiny programme organised by Sir Derek Rayner, and finally it states the Government's intention to publish a White Paper describing the past and future work of the Civil Service Department and Departments generally in the pursuit of efficiency.
I totally support those aims and purposes. If I have a disappointment it is that public expenditure is still so high, and there are more sophisticated questions to be asked. Is the taxpayers' money invariably well spent, carefully spent, productively spent? How steadily are the Government travelling towards the realisation of those objectives?
I shall go through those matters in paragraph 22 seriatim. We now have cash limits covering 60 per cent. of Government expenditure. On the recommendation of the Public Accounts Committee we have assimilated them with the Estimates—I hope that the Treasury and Civil Service Committee will look at the form of the Estimates—but we have done no more. We have never attempted to make them more sophisticated, or more telling. We have never attempted, for example, to isolate capital expenditure. It is not enough to rest on one's laurels for what has been achieved in the past.
The Treasury and Civil Service Committee will be monitoring reductions in Civil Service numbers. My right hon. and learned Friend the Chief Secretary referred to this. The figures are: April 1979, 732,000, now 695,000; target for the end of 1983–84, 630,000. So far, so good. But the total in Government service is not 695,000; it is 5 million, and what is so depressing—to pick up a point that the hon. Member for Grimsby was hinting at—is that 31 out of every 1,000 workers in the manufacturing and construction industries have been made redundant, compared with only three out of every 1,000 in the public service. Is it really appropriate that so much of the weight of the substantial squeeze that is now operating should seem to fall exclusively on the private sector? In any case, numbers alone provide a crude method of assessment. What is much more necessary is to inquire into the functions of what is done in the public service, and that I very much hope to see the Government beginning to do.
We are told that we have a severe restraint on public spending. What are the facts? There were considerable cost and volume overruns last year, but the assumptions on which the sum of the expenditure programmes is based this year and up to 1983–84 look almost as optimistic as they did when the Treasury and Civil Service Committee was expressing its forebodings last year.
In paragraph 6 of the White Paper we see the total cash spending, since it is cash that we talk about these days. It was £77 billion in 1979–80 and it is expected to be £94 billion in 1980–81—much greater than forecast, as I have indicated—and £104 billion in 1981–82. This hardly seems to be severe restraint in public spending.
Pay in the public sector is a major aspect of expenditure—30 per cent. of Government expenditure. It has risen twice as fast as it has in the private sector, and we are entitled to ask why. There is a further question, on paragraph 17 of the Treasury Committee's report. We say that it follows from the fact that a number of people in the public service have had increases in salary beyond the new norm of 6 per cent. that there will have to be reductions in manpower over and above those already planned if cash limits are to be adhered to. I hope that my right hon. Friend the Financial Secretary will be able to tell us quite firmly that the cash limits will be adhered to.
I want next to deal with the question of the nationalised industries. I have no hesitation in saying that it is an indictment of their management that in the context of a 15 per cent. increase in the retail price index last year there was a 30 per cent. increase in shop prices. We must try to instil competition in the nationalised industries. Does my right hon. Friend the Financial Secretary think that the turnround of £200 million suggested in 1980–81 to 1983–84, is a realistic target? As my right hon. and learned Friend the Chancellor of the Exchequer said in evidence to the Seclect Committee, it is not unambitious. I hope that that will be maintained.
In this important paragraph reference is made to the Rayner exercise. I have nothing but admiration for Sir Derek Rayner. He has saved hundreds of millions of pounds. I wonder whether hon. Members have had a good look at the evidence that the Comptroller and Auditor General gave to the Public Accounts Committee last Monday. I wonder whether hon. Members know that Government Departments are badly equipped in this respect. Whitehall employs 1,010 accountants. Only 47 work full-time on internal audit in 11 Departments. The


remaining Ministries do not have any accountants working on the subject. The Home Office has two accountants. The Civil Service Department, the Foreign and Commonwealth Office, the Overseas Development Administration, Her Majesty's Stationery Office, the Department of Industry, the Central Office of Information, and the Welsh Office have one each. In the Comptroller and Auditor General's statement to the Public Accounts Committee it was described as a Cinderella activity.
If paragraph 2 means what it says let us sharpen up control of expenditure within Government Departments. If Sir Derek Rayner, working part-time with a small staff, can do so much, what could a determined attitude not achieve? I warmly endorse the Government's objective to encourage greater realism towards our economic situation. Like the fight against inflation, that objective is succeeding. Those are matters for great rejoicing. However, the Government should set an example. What has been the result of the lack of complete success?
Paragraph 5 of the report of the Treasury and Civil Service Committee contains a mathematical aggregate of the measures taken in November and March. The following statement then appears:
These measures can therefore be seen as a tightening of the fiscal stance in 1981/82 compared with an unchanged policy position. The tightening comes at a time when the economy is already in deep recession.
Interest rates have been high. There are now 1·2 million more taxparers than there would have been if indexation had taken place. The recession is deeper than it would have been. The cost is heavy. We could bear all that, but if we had been able to get a better grip of the Government machine much of this misery might have been avoided.
The purpose of a Select Committee is to monitor and survey the activties of Government Departments and to report to the House. I hope that the House will find this report of use. In addition, I hope that my right hon. and hon. Friends will find it supportive of the Government's polices. I am grateful for the kindly references made to it by my right hon. and learned Friend the Chief Secretary. Many of the speeches contained it as a theme. Although it is not for me to say so, the Treasury and Civil Service Committee has had its successes. It has focused attention on the gravity of pay in the public sector. It has suggested alterations in the medium-term financial strategy, and so on.
It is the task of hon. Members to be constructive and to suggest policies that could assist and accelerate existing policies in order to make them successful and to reinforce the Government's determination. There is a report before the House from the Public Accounts Committee on the role of the Comptroller and Auditor General. It suggests that the Exchequer and Audit Department should move away from the mere mathematical function of audit and should concentrate more on value for money. Let that be accepted; it is very much needed.
Secondly, the matter of internal audit, to which I was referring a moment ago, should be given highest priority. Let us jack up Rayner and support him. The Civil Service should be doing that work.
Thirdly, let us have an examination of the services that the Government are providing to the taxpayer. In his admirable opening speech my right hon. and learned Friend the Chief Secretary said that there was so much Government expenditure that the Government could not affect that the social services now take over one-quarter

of all Government expenditure. That is true, but I repeat something that I said in the Flouse some time ago. We have the most complex, costly and difficult to understand series of transfer payments in the world. I am convinced that out of the £27 billion which they cost each year a considerable proportion could be saved and more help could he given to those who need it most.
Fourthly, let us bring the nationalised industries under better control in terms of the prices that they charge and the wages that they pay. They should be models of efficiency, but what are we doing? We are keeping open pits that are long past their usefulness. Let us break up these large units. We have only begun to do it. What happened to the plan to denationalise the Rover part of British Leyland?
My hon. Friend the Member for Carshalton (Mr. Forman) was entirely right when he so clearly made the point that a good deal of investment work is now inhibited by the lack of new methods of financing. If the French can do it, why cannot we?
Finally, I draw attention to the last paragraph of the report of the Treasury and Civil Service Committee. In a sentence, it says—the hon. Member for Stoke-on-Trent, Central (Mr. Cant) and my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) made the point—that nobody can judge the situation. Recovery does not look to be just round the corner. Why should it be? It certainly will not be automatic. With the greatest respect to my right hon. Friend the Financial Secretary, I do not believe that if the money supply is less than the rate of inflation growth will automatically follow. I wish with all my heart that I did believe that.
We are in the grip of substantial world forces. There are new areas of competition from the EEC, from the new Japans and from elsewhere. However, there is no recession in Japan. Why on earth should there be a recession here? The current level of unemployment is intolerable, as is the shrinkage of the manufacturing base. We can and we must change this waste.
Hon. Members will see in paragraph 21 of the Committee's report the way in which our fixed capital expenditure has declined over the years. I quote four figures. In 1975–76 that expenditure was £15,800 million. The planned figure for 1981–82 is £9,800 million. Those figures represent 19·4 per cent. and 12·4 per cent. respectively of total public expenditure in those years.
My right hon. and learned Friend's admirable and most respected brother refers to me in an article this morning—the hon. Member for Grimsby quoted it—as being like someone out of "Animal Farm" who has a perpetual grunt in favour of more investment. I simply say that I apologise in no way to the hon. Member, to my right hon. and learned Friend the Chief Secretary, or to anybody else if I press the case for further investment. I do not seek investment in just anything,. It must be responsible, carefully selected investment. There is so much to do—roads, nuclear power, electrification of the railways, the Severn barrage, new airports, schools, hospitals—

Mr. Antony Buck: And defence.

Mr. du Cann: Yes, of course, and defence. How right my hon. and learned Friend is.
Investment is a cost, as Mr. Samuel Brittan says it is, but it is a cost that we cannot do without. The infrastructure is deteriorating. Machinery, plant and


technology all underpin the economy. Then there is "crowding out"—what a ridiculous theory. All the cash in the world is available, as my hon. Friend the Member for Carshalton said, if we just go out and get it. Cash is available at home and abroad on a massive scale.
Why do not the Government make a list of all the desirable capital projects and then a list of those that can be financed privately at home and abroad? We boast that the City of London is the finest financial mechanism in the world. Let us put it to work, in harness with the Government and with national needs. Let us start the process.
Our people badly need hope. That is what we should give them—something to look forward to. It is my experience that tomorrow is always—alas, bitterly—too late.

Mr. Gerald Kaufman: The right hon. Member for Taunton (Mr. du Cann), in his concluding remarks, made a lethal attack upon the philosophy underlying the Chief Secretary's approach to this debate, and it is to his credit that he did so. Until he spoke, the most dramatic moment in the debate was when my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) announced that he had been reconverted from monetarism to Keynesianism. For him, the road to Damascas leads from Milton Friedman's Chicago to Maynard Keynes' Cambridge. The geography may be peculiar, but the politics and economics cannot be faulted.
The Opposition made amply clear that they challenge the whole basis of the Government's approach to public expenditure. Far from sharing the Prime Minister's crude and over-simplified hostility to public spending, we believe that spending by Government and local authorities, properly channelled and controlled, can enhance the life of the community and the nature of our society.
In the House and elsewhere the Prime Minister repeatedly declares that taxpayers and ratepayers know how to spend their money better than central Government or local government, and that, accordingly, central Government and local government should tax less and spend less. She was at it again at Question Time on Tuesday. But, as the right hon. Member for Taunton made cruelly clear, by the Prime Minister's own criteria, she and her Government have failed abjectly. Far from leaving people free to decide how to spend their own money, the Government are taxing more and spending more.
When Labour left office, taxation as a proportion of gross domestic product was about 40 per cent. Last month's Budget increased taxation as a proportion of gross domestic product from 40 per cent. to 48 per cent. Under this Government public spending has risen, too—up by 4·2 per cent. in the past financial year, and up again in the current financial year. Yet the Prime Minister, the Chancellor of the Exchequer and the Treasury Bench continue to inveigh against public spending.
To listen to the Prime Minister's vehement denunciations of what the Government are doing, one could be forgiven for thinking that she has nothing to do with the Government and that the Government have nothing to do with her. She is not so much the Iron Lady as the brazen

lady. Yet in the one area that is constantly subjected by the Government to intemperate abuse—local government—expenditure year by year has actually fallen.
To listen to members of the Government Front Bench, one would think that this country's local authorities were extravagant to the point of incontinence. [HON. MEMBERS: "Hear, hear".] Yet last year, while central Government spending was rising by 4·2 per cent., local government expenditure was falling by 6·9 per cent. Perhaps Conservative Members will cheer that. This year, while central Government expenditure is scheduled to rise still further, local government expenditure is planned to decline by a further 5·2 per cent. Local authority expenditure, as a percentage of total public spending, will fall from 28 per cent. in 1979–80 to 24·2 per cent. this year.
What is more, even on the basis of the Government's own assumptions local authorities consistently under-spend. Only last week the Department of the Environment was forced to admit that in each of the past four years for which figures are available English and Welsh local authorities spent less than was assumed in the rate support grant settlements. Yet the Government continue to blackmail and bludgeon local authorities into spending less and less.
The cuts imposed by the Government are causing enormous damage. Our public transport system is creaking and crumbling, yet capital investment in local public transport is planned to fall by 8 per cent. up to 1983–84. In the first two years of the Government, passenger transport subsidies have already fallen by 10 per cent. and are set to fall even further. In addition, there is a reduction of 6 per cent. in the trunk road construction programme for 1980–81 compared not with the Labour Government's best year but with their worst year of 1977–78.
Not long ago the Prime Minister sent accountants into the water authorities and it was announced afterwards, with a tremendous flourish, that as a result of those accountants bringing their shrewd housekeeping talents to bear, charges to the consumer were to be reduced. But the Prime Minister's accountants found few real savings to be made. Most of the reductions were brought about by fiddling the accounting procedures.
The position was described last month by Mr. Eric Gilliland, the president of the Chartered Institute of Public Finance and Accountancy—the public sector accountants who are constantly cited in evidence by the Secretary of State for the Environment, whose absence we note with interest and, perhaps, satisfaction. The Government have clearly felt that the debate is too important for him to be involved in it.
Mr. Gilliland said about the accountants:
There is no evidence so far that they have found genuine overspendings or waste. Rather, what they have basically advocated is financial manipulation—manipulation which will expose the organisations affected to greater risk, and perhaps cost, in the future. That way may be politically attractive, but not necessarily financially prudent".
It is fair to say that one genuine saving was made—a cut of £25 million in the water authorities' capital investment programmes. That cut will not only put more people out of work; it will lead to a deterioration in the system which will cost more to put right later.
The effect of the Government's cuts on housing will be even more catastrophic. My hon. Friend the Member for


Fife, Central (Mr. Hamilton) gave an example of a cruel cut in provision for wheelchair tenants in Glenrothes. That is one sad part of a depressing overall picture.
Last week, Mr. Peter McGurk, the under secretary for housing at the Association of Metropolitan Authorities, told a conference of the Royal Institute of British Architects:
We are rapidly reaching the stage of running into a monumental housing crisis".
In the current financial year, spending on housing will be a little over one-quarter of what it was in the Labour Government's peak year of 1975–76 and less than one-half of what it was when Labour left office. Council house starts in England so far this year are running at the contemptible annual rate of less than 15,000.
Over local government spending in total in the period of office of this Government, current expenditure has fallen by 4·7 per cent. while capital spending has been cut by a disastrous 31·6 per cent., but the Chief Secretary had the nerve to say that the Government are giving much more effective priority to capital spending.
Inevitably the effect of the cuts on jobs has been devastating. Employment well outside local government has been hit because each year local authorities purchase £6 billion worth of goods from the private sector. However, the Prime Minister, the Chancellor and the Secretary of State for the Environment continue to hound local councils and to urge them to spend less.
The situation of local authorities has become so intolerable that even Tory Back Benchers are beginning to stage Adjournment debates to squeal about their own Government's harshness. In one such debate last week the hon. Member for Rugby (Mr. Pawsey) complained that the Government were treating his Tory-controlled council with what he described as
unforeseen heavy penalties".—[Official Report, 31 March 1981; Vol. 2, c. 264.]
The hon. Member for Abingdon (Mr. Benyon) denounced the Government's block grant system as "obscure, inefficient and arbitrary." He told the House that in the Tory-controlled but romantically named district council the Vale of the White Horse,
the savings that are contemplated will cut into the bone because there is no fat left."—[Official Report, 19 March 1981; Vol.1, c. 533–34.]
In the Vale of the White Horse they now know that the Prime Minister's favourite film is called "They Shoot Horses Don't They". The Secretary of State still rants on about local authority extravagance in the dark world of conspiracy in which he lives. The right hon. Gentleman now claims that it is all a Left-wing plot. A couple of weeks ago he told Mr. Brian Walden, on television:
I cannot allow the Government's economic strategy to be deliberately ignored for party political reasons by the sort of authority that is beginning to emerge on the left of the political spectrum.
The right hon. Gentleman has two criteria by which he judges whether local authorities are overspending. First, there are the grant-related expenditure assessments that set down for each local authority what the Secretary of State thinks they need to spend to maintain the service that he says they should provide. If they spend substantially in excess of that grant-related expenditure, they are liable to be penalised.
The second of the right hon. Gentleman's criteria is his expenditure target. This orders each local authority to cut its spending in the current year, compared with the 1978–79 level, by 5·6 per cent. Yesterday I asked him why

he had chosen a cut of 5·6 per cent. He shed dazzling light on the situation by replying that it was because he had chosen a cut of 5·6 per cent. If a local authority does not obey the Secretary of State's instruction to cut its expenditure by a figure for which he gives no reason it is liable to be penalised, but in a different way.
The trouble is that a local authority that spends what the Secretary of State says it needs to spend is liable to be penalised for spending more than he says it should spend. Many local authorities, despite their best or worst efforts, have found it impossible to cut their expenditure to the levels necessary to meet either of the right hon. Gentleman's targets.
The right hon. Gentleman tells us darkly that such councils are the sort that are beginning to emerge on the Left of the political spectrum. I must tell the House that he is tracking down Leftists in the most unlikely places. Among the local authorities on the Left of the political spectrum that have been finding it impossible to meet either of the right hon. Gentleman's targets are Tory Bromley, Redbridge, Sutton, Enfield, Bury, Buckinghamshire, Cumbria, East Sussex, Northumberland, Warwickshire, Hertfordshire, Cheshire, Cleveland, Avon, West Midlands, Greater Manchester and Merseyside, but these frail political butterflies are brutally pinned down by the right hon. Gentleman as Marxist-oriented saboteurs.
One of the guiltiest of all is the apple of the Prime Ministers eye, the leader of the Tory Greater London Council, Sir Horace Cutler. His treasurer's office across the river has admitted to me that it is scheduled to overspend on the grant-related expenditure by 12 per cent. and on its 5·6 per cent. expenditure target by £10 million. Lately, we have been reading a good deal of sensational material about spies and undercover agents, but it still comes as a serious blow to find Sir Horace Cutler unmasked as the secret Red mole of County Hall. If we want to know the sinister culprit who is undermining the Government's economic strategy, the Secretary of State has the answer—the Cutler did it.
Many of those Tory authorities are overspending on the Secretary of State's criteria because they have massively lost grant. The Secretary of State has cut rate support grant this year by £800 million. He has cut housing subsidies by nearly as much. However, even authorities which gain grant are still having to make cruel cuts. Tory-controlled Wiltshire gains £40 million in rate support grant. However, its spending cuts have been so intolerable that one of its principal social services officials, Mr. Dennis Rugg, has resigned in protest. He said about his resignation:
I had to protest at cuts to which I am entirely opposed. I have been a Conservative for most of my life, but I have changed because of this Government's policy. The needy are suffering because of the cuts. I was in the front line and living life oar death situations every day. I could not go on coping"—
the hon. Member for Enfield, North (Mr. Eggar) can laugh at this if he likes—
with things like fighting to get a bed for a woman in an old folks home and then seeing her die first.
That is life in Tory Wiltshire today. Yet under the Secretary of State's crazy criteria, Wiltshire is overspending by 4·8 per cent. and is liable to be penalised by the right hon. Gentleman.
What are those offences which authorities such as Wiltshire and the Greater London Council are committing? They are offences which are not known in law. All


the councils which I have named and many others as well are taking decisions which are perfectly lawful. When it makes its spending decision this spring, a council does not know that it is committing an offence. The Secretary of State does not know that the council is committing an offence, because it is not committing an offence, since no offence exists at the time of its decision.
The Financial Secretary may protest, but the problem is that the Secretary of State has warned that later this year he may decide to create an offence out of an action which, at the time it was taken, the council did not know was an offence. The Secretary of State did not know that it was an offence. The Secretary of State did not know that he would make it an offence. In fact, it was not an offence. Moreover, as and when the Secretary of State decides to make it an offence, if he decides to make it an offence, he will think up a penalty for the offence. But he does not know now what penalty he will invent for an offence which he has not yet invented and which he does not yet know whether he will make an offence.
Therefore, the councils do not know whether they are committing an offence or even whether there will be an offence. They do not know what the penalty will be for the offence that they do not know they are committing, because they will not know until after they have committed it—if they have committed it—that they have committed an offence which they do not know they are committing. The Secretary of State does not know whether he will create an offence, what the offence will be, if he decides to create it, and what the penalty will be if he decides to create the offence that he does not yet know he intends to create.
If that were being done in Soviet Russia, the Prime Minister would bitterly denounce it at the Dispatch Box, but she is doing it in Britain. In a democracy one is told in advance what an offence is and what the penalty is if one commits it. In a police State, one commits an offence unknowingly and finds out later what the punishment will be.
The Prime Minister has chosen the method of the police State in her treatment of local authorities. The Government have three weapons to use—the multiplier, the threshold and the taper. To punish local authorities the Secretary of State can meddle with their multiplier, fiddle with their threshold or tamper with their taper, or he can do all three. Whatever method he employs, he will take even more money away from local authorities. In fact, only this evening the right hon. Gentleman had to admit to me that he was reducing by £303 million the payments in rate support grant that local authorities thought that they had every right to expect under his block grant formula. He ominously warns that further punitive action may come later this year, when he threatens to wield yet another of his multifarious disciplinary devices—resetting the poundage schedules.
All that bears out this week's report that the Secretary of State has decided to suppress publication of local authority budgets until after next month's local elections, because so many Tory authorities have smashed through the barrier of his financial targets that the problem has become a serious political embarrassment to him.
However much money the right hon. Gentleman takes away from local authorities, it will inevitably mean more

cuts in services and even more cuts in jobs; and the job reductions in local government have already been devastating.

Mr. Eggar: Can the right hon. Gentleman tell us the highest percentage of redundancies of any local authority?

Mr. Kaufman: I shall do two things. I shall refer the hon. Gentleman to the answer that his right hon. Friend gave me yesterday and I shall give the information that I was about to give, which may clarify the situation for him.
The Department of the Environment announced last week that between this Government's return to office and the end of last year jobs in local government had been cut by 65,581. Before hon. Members on the Government Benches cheer at the massacre of pen-pushing, tea-drinking, town hall bureaucrats, let me point out that white collar employment has been reduced by only 0·2 per cent. Almost all the jobs lost have been manual jobs, carried out by workers providing a direct service to their communities—caretakers, cleaners, dustmen and building workers. Comparing this year's public expenditure White Paper with last year's the consequences of the Government's policy of deliberately creating unemployment, not only in local government but throughout the economy, become startingly clear.

Mr. Eggar: On a point of order, Mr. Speaker. Having said that he will answer my question, is it in order for the right hon. Gentleman not to give an answer?

Mr. Speaker: Order. In the 36 years that I have been in the House that has often happened, although I am not saying that it is happening now.

Mr. Percy Grieve: Will the right hon. Gentleman give way?

Mr. Kaufman: Not at the moment.
Last year's public expenditure White Paper allocated £846 million for unemployment benefit in 1980–81, but this year's White Paper shows that the figure is actually £1,007 million, an increase of £161 million, or 19 per cent. For the current financial year, last year's White Paper allocated £800 million for unemployment benefit, but for the same year the White Paper before us has increased the allocation from £800 million to £1,238 million—an increase of £438 million, or 55 per cent.
Last year's White Paper allocated £700 million for unemployment benefit for each of the years 1982–83 and 1983–84. This year's White Paper increases the allocation for each of those two years from £700 million to £1,100 million—an increase of 57 per cent. Even that is a grotesque understatement, as the White Paper estimates that unemployment will be even higher in the next two financial years than it will be this year. Even so, for those four financial years, the White Paper allocates £4,445 million for unemployment benefit—£1,400 million more than in last year's White Paper.
That is where the Government's expenditure is going. That is why local government spending has to be cut. That is why, as my hon. Friend the Member for Grimsby (Mr. Mitchell) pointed out, ratepayers have to make do with poorer public transport, darker and dirtier streets, fewer houses and worse educational provision for their children.

Mr. Grieve: rose—

Mr. Kaufman: If the hon. and learned Gentleman had been present for any of the debate apart from this winding-up speech, I should have given way to him.
The cuts and the unemployment are the result not of some grand economic design but of the need to finance the unemployment that the Prime Minister and the Chancellor have created by their wild and dogmatic schemes.
In a similar debate two years ago, the Chancellor made the following vainglorious boast:
Chancellor Barber … left office with very substantially fewer people out of work than when he took office. Indeed, in that respect every Conservative Government have been the same, in contrast to every Labour Government, since the war."—[Official Report, 22 May 1979; Vol. 967, c. 903.]
As it happens, the Chancellor was wrong. Unemployment at the end of the period of office of the last two Conservative Governments was higher than it was when they took office. But will the right hon. and learned Gentleman promise the House that at the end of this Parliament there will be fewer people out of work than when he took office? He is here and making a note, but he cannot give that commitment because his own White Paper forecasts the exact opposite. Even if he made that promise, who would believe him? After all, he is the man who issued the following statement almost exactly two years ago during the general election campaign:
Conservative Central Office
News Service
Release time: Immediate/Saturday, 21 April, 1979 GE646/79 Statement by the Rt Hon Sir Geoffrey HOWE, Conservative Parliamentary Candidate for Surrey, East and Conservative spokesman on Treasury and economic affairs.

LABOUR'S DISHONESTY

There were a number of inexcusable errors in Labour's televised party election broadcast on Friday, which I would like to correct. We have absolutely no intention of doubling VAT."

The right hon. and learned Gentleman continued:
So all the claims made about the price of household goods, shoes, cars etc., are utterly false.… Issued by Publicity Department, Conservative Central Office, 32 Smith Square
In that statement, the Chancellor made—to use his own words—an inexcusable error. In the two years since then, his whole tenure of office has been an inexcusable error. That is why we shall vote against him and his White Paper tonight.

The Financial Secretary to the Treasury (Mr. Nigel Lawson): I can best describe the speech of the right hon. Member for Manchester, Ardwick (Mr. Kaufman)—this applies in particular to his final remarks—as grandiloquent and meaningless. Perhaps that is not so surprising, because I have here a little red book containing useful advice for those who speak from the Dispatch Box. On page 95 of that book it says:
Your final paragraphs should be grandiloquent, even if almost meaningless".
The author of the book is, of course, none other than the right hon. Member for Ardwick. Certainly no one, at least in this respect, can accuse him of not practising what he preaches.

Mr. Kaufman: Would the right hon. Gentleman please be good enough to name the publisher and the price?

Mr. Lawson: Whatever the price, the book is worth a great deal more than the speech that we heard from the right hon. Gentleman.
The right hon. Gentleman tried to make great play with the fact that the trends in central Government and local authority spending have somehow been different, as if local authorities have been discriminated against. What he

may not know—because he is a newcomer in this field—is that some two-thirds of all public expenditure is taken up by five main programmes—social security, defence, health, housing and education.
For demographic reasons, social security spending is rising. For policy reasons, defence spending is rising. Also for policy reasons, health expenditure is rising. That was the commitment that we gave. By contrast, we said clearly that expenditure on education, again for demographic reasons—among others—and housing—because there is a flourishing private sector—would be cut.
It is a matter of fact that the social security programme, the defence programme and the health programme come under central Government, whereas expenditure on education and housing comes under local government. That is the reason for the differing trends in local government and central Government, and there is no way in which there has been any discrimination against local government, as such.

Mr. Mike Thomas: rose—

Mr. Lawson: The general picture painted by Labour Members, as far as one can judge from most of the speeches—and I have been present during most of the debate—is that public expenditure has been cut savagely and that virtually all that is left is benefits for the unemployed. That is the sort of picture that we have been given. That is the caricature, but what is the reality?
The reality is that public expenditure in the coming year is expected to run at about £110,000 million. That is about £5,500 a year for every family in the land. Of that, only 3p in every pound is spent on benefits for the unemployed, and that includes supplementary benefit.
Indeed, it is hard not to be struck by the very marked discrepancy that exists between the sour and dismal comments on both the Budget and the public expenditure White Paper that we have heard from Labour Members, and the dispassionate verdict of the markets, which the right hon. Member for Leeds, East (Mr. Healey), when he was Chancellor of the Exchequer, was always so fond of quoting, as his right hon. Friend the Member for Heywood and Royton (Mr. Barnett) will remember. I am not quite sure what has happened to the right hon. Member for Leeds, East. He is not in his place now. We do not see him so much these days.
Since the Budget, while sterling has remained virtually unchanged the gilt-edged market has taken on a new lease of life, absorbing very large quantities of Government stock, in addition to the new indexed gilt, which judiciously began its life at precisely par, while the equity market has reached a new all-time high.
What is interesting in particular is that the surge in equities has been led by industrial shares. So much for the allegation of the gang of 364 that our industrial base was being destroyed. I also throw in, as an aside for my hon. Friends, that even bank shares have risen since the Budget. Industrial shares have risen considerably more.
The House is greatly indebted to the Select Committee on the Treasury and Civil Service, under the distinguished chairmanship of my right hon. Friend the Member for Taunton (Mr. du Cann), who yesterday brought out a brief report on the Budget and the public expenditure White Paper, which has been widely alluded to in the debate.
The House is equally indebted to the Committee for the press conference that it held yesterday, which helped to


put that report in its proper perspective. The Committee devoted a large part of its report to an absorbing—at least I found it absorbing—discussion of some remarks that I made last month at a gathering of the Institute for Fiscal Studies. It suggested that in the light of those remarks the Government should take the opportunity, in this debate, to spell out more fully their view on the relationship between monetary growth and the growth of real output in the economy. The right hon. Member for Stepney and Poplar (Mr. Shore) specifically asked me whether I would deal with that and I promised him that I would do so.
The Government's economic strategy starts from the undeniable fact that there is a clearly discernible medium-term relationship between the growth of the money supply and the growth of output in money terms. To be precise, output as measured in money terms tends to grow at between 1 per cent. and 2 per cent. more than the money supply. In an abnormal year it can diverge from that, sometimes quite considerably. But it always subsequently comes back on trend. There is no reason to suppose that the coming year will be one of those abnormal years; nor did the Committee's report suggest any reaon why it should be.
Our central target for the growth of money supply over the coming year is 8 per cent. That would imply a growth in output, in money terms, of between 9 per cent. and 10 per cent., so the question that arises—[Interruption.]—I hope that hon. Gentlemen will listen, because the right hon. Member for Stepney and Poplar specifically asked me to deal with this in my reply—is how much of the 9 per cent. to 10 per cent. growth in output, in money terms, is simply a reflection of inflation, and what will happen to output in real terms.
It is true that a 10 per cent. growth in nominal output, for example, could be composed of a 5 per cent. growth in real output and a 5 per cent. growth in prices or a 5 per cent. fall in real output and 15 per cent. inflation, or any other combination that adds up to 10 per cent.
However, we have published our best guess as to the rate of inflation over the coming year. It is published in the Red Book, and we see it falling to 10 per cent. in six months' time and 8 per cent. in a year from now. Despite its profound, not to say at times obsessive, interest in short-term forecasting, the Treasury and Civil Service Committee does not dispute those figures, which are well in line with the majority of outside forecasts.
Given this rate of inflation, there is clearly nothing contractionary whatever about the present stance of Government policy. That conclusion is in no way affected by a Budget which increased taxation to pay for increased Government spending. Indeed, given this prospect for inflation over the coming year, the Government's monetary target allows room for a gradual increase in real output over the latter part of the year. That is what we expect to occur, and the figures that we are forecasting are published in the Red Book. That is the argument that I was advancing in my speech to the Institute for Fiscal Studies in which the Committee showed so much interest.
I see that my right hon. Friend the Member for Worthing (Mr. Higgins) is paying particular attention: I know his deep interest, although he did not contribute to the debate today.
The Committee became slightly confused when it extrapolated from that argument and implied that I was

suggesting that over the medium and longer term the rate of monetary growth would determine the level of real output. Had Members of the Committee read my speech more carefully, or had they had the pleasure of attending the meeting, they would have realised that I suggested nothing of the sort. Indeed, it would have been astonishing if I had. The belief that the growth of monetary demand—whether engineered by deficit spending or any other way—determines the growth of real output is the very essence of the neo-Keynesian error which led to the inflationary disaster of the 1970s and which this Government have explicitly disavowed.
Our contention is that while in the short term an expansion in the money supply can give a boost to real output, in the medium and longer term it has no positive effect on output. All that it does is to increase prices. By contrast, we believe that the real level of output is determined in the long run by real and not monetary factors. That should not be so surprising. It is determined by the productivity and efficiency of industry, by the effective working of markets, by the behaviour of trade unions, by the performance of management and by the hard work, energy and enterprise of the British people.
Needless to say, none of this in any way implies that the Government's medium-term financial strategy is contractionary, as the Committee appears to believe. That is because as inflation continues to moderate over the years the declining rate of money supply growth implied by the medium-term financial strategy allows ample scope for a continuing growth of output.
It is true that a dramatic break in inflationary expectations which is the essential first step in the battle against inflation—and a step which we have achieved—sadly but invariably requires a decline in the real money supply and thus some decline in output. But it is an illusion to suppose that continued success in the battle against inflation requires monetary growth to be continually below the current level of inflation.
What is required, however, is widespread recognition that should there for any reason, internal or external, at any time be an inflationary surge in the economy, the Government of the day will not accommodate that surge by printing more money.

Mr. Shore: The House has listened to an extraordinary academic and theoretical exposition of hypotheticals dealing with anticipated rates of growth, of money supply and inflation. The real world was lost. Will the Financial Secretary now turn his attention to the matter which is of great interest to us all? Is the Budget in its general effect deflationary, as was broadly concluded by the Select Committee, or is he seriously trying to argue that because of the relationship between the anticipated growth in the money supply and the anticipated growth of monetary income fiscal deflation does not matter?

Mr. Lawson: I have already dealt with that in language which I tried to make as simple as possible for the benefit of the right hon. Member for Stepney and Poplar. I made it far more simple than the esoteric language of some of the papers produced by the Select Committee. The hon. Member for Motherwell and Wishaw (Dr. Bray), who was a distinguished member of the committee on policy optimisation, brings in mathematics and diagrammatic explanations at the drop of a hat. I would certainly not dream of doing that to this House or any other forum.

Dr. Bray: I regret not having had the distinction of serving on the committee on policy optimisation. Is the Financial Secretary, in his explanation tonight and in the explanation given in his paper to the Institute for Fiscal Studies, which I read carefully, saying that there is a unique relationship between the money supply and its inflation and output effects later? Or is he acknowledging that there is also a fiscal effect, which, in the context of the present. Budget, has been savagely deflationary?

Mr. Lawson: I apologise for saying that the hon. Gentleman was a member of the committee on policy optimisation. He merely inspired the committee, but was not actually a member of it. I should like to read what I said at the Institute for Fiscal Studies. I said:
The truth is that the reduction in the PSBR brought about by the Budget is unlikely to make much overall difference to the total level of demand. In the short term, there may be some very modest contractionary effect
That is what I said. Anyone who read the speech would have discovered it. I also said:
But the more important point is that, taking full account of the Budget, we expect output to be on a rising trend during 1981–82
That is the year ahead.
I suggested, too, reasons why that was likely. I identified, for example, three of the main elements in the recession that we have seen—the massive wave of destocking, the sharp increase in the savings ratio, and the world recession. Over the coming year, the prospect is that these three elements will be working in the opposite direction. The rate of destocking is likely to decline as inventories reach the desired lower level. The savings ratio is likely to fall as inflation and inflationary expectations subside. There is generally expected to be some upturn in the world economy. We have the encouraging behaviour of the economic indicator series published by the Central Statistical Office, with a proven track record. All are now clearly signalling a turning point in the economy.
Despite that, the Treasury and Civil Service Committee was worried. In his speech today my right hon. Friend the Member for Taunton echoed that worry. The Committee said:
It is hard to discern any engine of sustained recovery".
The word "engine" is surely the great give-away. It implies that there is some great mechanism of economic growth that will deliver the goods provided only that the Government of the day intervene to press the right buttons and pull the appropriate levers. The truth is that there is no such mechanism. The previous Government, particularly the Treasury team of which the right hon. Member for Heywood and Royton was a member, well understood this. The only engine of economic growth—

Mr. Peter Tapsell: rose—

Mr. Lawson: I will give way later. The only engine of economic growth is what Keynes referred to as the animal spirits of the people. Out in the real economy, it is clear that those animal spirits are vigorously at work. Anyone who speaks to those involved in industry and to business men will discover this fact for themselves.
I was interested to read on the front page of The Sunday Times Business News last week an article by Mr. Roger Eglin, a reporter whose ear has always been close to the ground. He wrote:
What amounts to a sea-change is going on in industry, but not surprisingly it has largely gone unpublicised
The article went on:

Yet though this recession has wiped out one in every 10 manufacturing industry jobs, the idea that industry has been done irreparable damage doesn't stand serious examination. In fact the reverse is probably true.

Mr. Tapsell: If Government action can produce a recession, why is it that it cannot produce the opposite? Secondly, why has my right hon. Friend devoted almost his entire speech to proving that this Budget is not deflationary if the object of the whole exercise is to conquer inflation?

Mr. Lawson: The word "deflation" is particularly misleading, which is why I used the term "contractionary". I said that this Budget was not contractionary. Of course its whole purpose is to conquer inflation. Indeed, that has been the purpose of my right hon. and learned Friend's previous Budgets, and considerable success has been achieved on that front, as my hon. Friends are well aware.
There were a number of other contributions from those of my hon. Friends—[HON. MEMBERS: "Answer the question".] I have answered the question. Unfortunately, I was not in the Chamber to hear the speech of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). However, I was given an account of what he said, and I agree with every word.
I had the privilege of listening to my hon. Friend the Member for Enfield, North (Mr. Eggar), who was another member of that distinguished Treasury and Civil Service Committee. He made a notably honest speech. Like many of my hon. Friends, he said that it was no good simply calling for cuts in public expenditure on current account in order to make room for increases in expenditure on capital account. Many of my hon. Friends wish to see that, although they have made it quite clear that they are not calling for an increase in public expenditure overall. But it is no use doing that unless one addresses oneself to the sort of cuts in current expenditure which would be required.
My hon. Friend the Member for Enfield, North underlined the difficulty of doing that. He made certain suggestions, as did my right hon. Friend the Member for Taunton. That is helpful. In last year's public expenditure debate I had the temerity to suggest that perhaps the most helpful thing which the Treasury and Civil Service Committee could do would be to make suggestions about where the cuts in current expenditure might be found in order to make way for increased capital expenditure which was worth while. I entirely agree with my right hon. and learned Friend that by no means all capital expenditure is worth while. In fact, some of the most conspicuous examples of waste in the public sector are to be found in capital expenditure. I hope that those suggestions will be forthcoming.
The right hon. Member for Stepney and Poplar asked me to confirm the CBI figure that a reduction in debt interest of 1 per cent. would produce a public expenditure saving of £250 million. That figure is of the right order of magnitude. Our best calculations estimate that there would be a saving of between £200 million and £250 million.
However, if the right hon. Gentleman's policies were to be followed, and if public expenditure and the borrowing requirement were substantially increased, interest rates would have to rise substantially as well. That would mean that the cost of debt interest would substantially increase.

Mr. Shore: Rubbish.

Mr. Lawson: It is no use the right hon. Gentleman saying "Rubbish". Perhaps he does not realise the importance of cutting public expenditure as keenly as his right hon. Friend the Member for Heywood and Royton, who had responsibility in this regard. I should like to read what the right hon. Gentleman had to say to his friends in an article in The Guardian some 18 months ago. He said:
For Labour's view to be credible, the sooner we face up to the need for some cuts, the better.
Until the right hon. Gentleman has faced that, too, he will not be credible.

Mr. Shore: What is surely extraordinary to most people of average sense is that the Government should be pursuing a policy of containing public expenditure in the middle of the worst recession that this country has experienced in the past 50 years. If he really tries to argue that, with the public sector borrowing requirement at a lower percentage of GDP than it has been in any of the last 10 years, it is impossible to borrow money without raising interest rates, he had better have a word with his right hon. Friend the Member for Taunton (Mr. du Cann).

Mr. Lawson: I think that the right hon. Gentleman ought to have a word with his right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), who, when he was leader of the Labour Party and Prime Minister, explained at some length at a Labour Party conference in 1976, I think it was—at which I assume the right hon. Gentleman the Member for Stepney and Poplar was present—that there was no way in which we could spend ourselves out of a recession; all that we did was to spend ourselves into inflation. The right hon. Member for Heywood and Royton knows that, and until the right hon. Member for Stepney and Poplar understands it he will be no fit aspirant for any high office.
The right hon. Member for Stepney and Poplar made a similar speech, of course, in the Budget debate. He was answered very effectively by the hon. Member for Gateshead, West (Mr. Horam), who is one of the more informed Members of the Social Democratic Party. I would rather refer to what he said than to what the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) said. He said:
the proposals of the right hon. Member for Stepney and Poplar (Mr. Shore) were over-egging the pudding with a vengeance. He would gorge us on reflation to an extent which would lead to the spiralling inflation we had in the first two years of the last Labour Government."—[Official Report, 16 March 1981; Vol. 1 c. 60–1.]
That is right. He has learnt nothing. I give the hon. Member for Gateshead, West his due; he is an adornment to his new party. He said this in an article in The Spectator recently:
The Left may have been wrong and are now not only wrong but sadly dated, but they were at least addressing the problem. Mrs. Thatcher has in her way addressed the problem. The people who did not were the old-style Social Democrats who ran the Callaghan Government.
What he is now doing among the old-style Social Democrats, I am not quite sure.

Mr. Mike Thomas: Would the right hon. Gentleman care to explain the point that I raised with him, namely, how it is that his Government, while saying that they are cutting public expenditure, are increasing it; while saying that they are cutting taxation, have in fact increased the burden of taxation by 20 per cent. of GDP since they came

into office, and at the same time are managing to cut, in real terms, services to the elderly, the homeless, the sick, the handicapped, the disabled and every other group?

Mr. Lawson: That is quite untrue. In the Budget we made a substantial increase in the mobility allowance, in real terms. There have been various other increases in help for the disabled that my right hon. and learned Friend the Chancellor of the Exchequer introduced in his Budget and to which he devoted a section of his Budget Statement.
The truth is that right hon. and hon. Gentlemen have no solution other than printing and borrowing, and evermore inflation. Indeed, when the right hon. Member for Stepney and Poplar says that borrowing finances itself—something echoed by the hon. Member for Grimsby (Mr. Mitchell)—I wonder why he does not abolish taxation altogether. If borrowing automatically finances itself, why not finance everything by borrowing? There would be no need to have any taxation at all. The right hon. Member for Stepney and Poplar should learn a bit about what he is trying to lecture the House on before he lectures us again.
I commend the White Paper to the House.

Question put, That the amendment be made:—

The House divided: Ayes 232, Noes 300.

Division No. 152]
[10 pm.


AYES


Adams, Allen
Davis, T. (B'ham, Stechf'd)


Allaun, Frank
Dean, Joseph (Leeds West)


Alton, David
Dempsey, James


Anderson, Donald
Dewar, Donald


Archer, Rt Hon Peter
Dixon, Donald


Ashley, Rt Hon Jack
Dobson, Frank


Ashton, Joe
Dormand, Jack


Atkinson, N (H'gey,)
Douglas, Dick


Barnett, Guy (Greenwich)
Douglas-Mann, Bruce


Barnett, Rt Hon Joel (H'wd)
Dubs, Alfred


Beith, A. J.
Dunn, James A.


Bennett, Andrew(St'kp't N)
Dunnett, Jack


Bidwell, Sydney
Dunwoody, Hon Mrs G.


Booth, Rt Hon Albert
Eastham, Ken


Boothroyd, Miss Betty
Edwards, R. (W'hampt'n S E)


Bradley, Tom
Ellis, R. (NE D'bysh're)


Bray, Dr Jeremy
Ellis, Tom (Wrexham)


Brocklebank-Fowler, C.
English, Michael


Brown, Hugh D. (Provan)
Ennals, Rt Hon David


Brown, R. C. (N'castle W)
Evans, Ioan (Aberdare)


Callaghan, Rt Hon J.
Evans, John (Newton)


Callaghan, Jim (Midd't'n &amp; P)
Field, Frank


Campbell, Ian
Fitch, Alan


Campbell-Savours, Dale
Fitt, Gerard


Canavan, Dennis
Flannery, Martin


Cant, R. B.
Fletcher, Raymond (Ilkeston)


Carmichael, Neil
Fletcher, Ted (Darlington)


Cartwright, John
Foot, Rt Hon Michael


Clark, Dr David (S Shields)
Ford, Ben


Cocks, Rt Hon M. (B'stol S)
Forrester, John


Cohen, Stanley
Foster, Derek


Coleman, Donald
Foulkes, George


Concannon, Rt Hon J. D.
Fraser, J. (Lamb'th, N'w'd)


Conlan, Bernard
Freeson, Rt Hon Reginald


Cook, Robin F.
Freud, Clement


Cowans, Harry
Garrett, John (Norwich S)


Craigen, J. M.
Garrett, W. E. (Wallsend)


Crawshaw, Richard
George, Bruce


Crowther, J. S.
Gilbert, Rt Hon Dr John


Cryer, Bob
Ginsburg, David


Cunliffe, Lawrence
Golding, John


Cunningham, G. (Islington S)
Gourlay, Harry


Dalyell, Tam
Graham, Ted


Davidson, Arthur
Grant, George (Morpeth)


Davies, Rt Hon Denzil (L'lli)
Hamilton, W. W. (C'tral Fife)


Davies, Ifor (Gower)
Harrison, Rt Hon Walter


Davis, Clinton (Hackney C)
Hart, Rt Hon Dame Judith






Hattersley, Rt Hon Roy
Prescott, John


Haynes, Frank
Price, C. (Lewisham W)


Healey, Rt Hon Denis
Race, Reg


Heffer, Eric S.
Radice, Giles


Hogg, N. (E Dunb't'nshire)
Rees, Rt Hon M (Leeds S)


Home Robertson, John
Richardson, Jo


Homewood, William
Roberts, Albert (Normanton)


Horam, John
Roberts, Allan (Bootle)


Howell, Rt Hon D.
Roberts, Ernest (Hackney N)


Hughes, Mark (Durham)
Roberts, Gwilym (Cannock)


Hughes, Robert (Aberdeen N)
Robertson, George


Hughes, Roy (Newport)
Robinson, G. (Coventry NW)


Janner, Hon Greville
Rodgers, Rt Hon William


Jay, Rt Hon Douglas
Rooker, J. W.


John, Brynmor
Roper, John


Johnson, Walter (Derby S)
Ross, Ernest (Dundee West)


Jones, Rt Hon Alec (Rh'dda)
Ross, Stephen (Isle of Wight)


Jones, Barry (East Flint)
Rowlands, Ted


Jones, Dan (Burnley)
Ryman, John


Kaufman, Rt Hon Gerald
Sever, John


Kerr, Russell
Sheerman, Barry


Kilroy-Silk, Robert
Sheldon, Rt Hon R.


Lamborn, Harry
Shore, Rt Hon Peter


Lamond, James
Short, Mrs Renée


Leadbitter, Ted
Silkin, Rt Hon J. (Deptford)


Leighton, Ronald
Skinner, Dennis


Lewis, Arthur (N'ham NW)
Smith, Rt Hon J. (N Lanark)


Lewis, Ron (Carlisle)
Snape, Peter


Litherland, Robert
Soley, Clive


Lofthouse, Geoffrey
Spearing, Nigel


Lyon, Alexander (York)
Spriggs, Leslie


Lyons, Edward (Bradf'd W)
Stallard, A. W.


Mabon, Rt Hon Dr J. Dickson
Stewart, Rt Hon D. (W Isles)


McCartney, Hugh
Stoddart, David


McDonald, Dr Oonagh
Stott, Roger


McElhone, Frank
Strang, Gavin


McKay, Allen (Penistone)
Straw, Jack


McKelvey, William
Summerskill, Hon Dr Shirley


MacKenzie, Rt Hon Gregor
Thomas, Jeffrey (Abertillery)


Maclennan, Robert
Thomas, Mike (Newcastle E)


McTaggart, Robert
Thomas, Dr R (Carmarthen)


McWilliam, John
Thorne, Stan (Preston South)


Magee, Bryan
Tilley, John


Marks, Kenneth
Tinn, James


Marshall, D (G'gow S'ton)
Torney, Tom


Marshall, Dr Edmund (Goole)
Urwin, Rt Hon Tom


Marshall, Jim (Leicester S)
Varley, Rt Hon Eric G.


Martin, M(G'gow S'burn)
Wainwright, E.(Dearne V)


Maxton, John
Wainwright, R.(Colne V)


Meacher, Michael
Weetch, Ken


Millan, Rt Hon Bruce
Wellbeloved, James


Miller, Dr M. S. (E Kilbride)
Welsh, Michael


Mitchell, R. C. (Soton Itchen)
White, Frank R.


Morris, Rt Hon C. (O'shaw)
White, J. (G'gow Pollok)


Morris, Rt Hon J. (Aberavon)
Whitehead, Phillip


Morton, George
Whitlock, William


Moyle, Rt Hon Roland
Wigley, Dafydd


Mulley, Rt Hon Frederick
Willey, Rt Hon Frederick


Newens, Stanley
Williams, Rt Hon A. (S'sea W)


Oakes, Rt Hon Gordon
Wilson, Gordon (Dundee E)


Ogden, Eric
Wilson, Rt Hon Sir H. (H'ton)


O'Halloran, Michael
Wilson, William (C'try SE)


O'Neill, Martin
Winnick, David


Orme, Rt Hon Stanley
Woodall, Alec


Owen, Rt Hon Dr David
Woolmer, Kenneth


Palmer, Arthur
Wrigglesworth, Ian


Parker, John
Young, David (Bolton E)


Pavitt, Laurie



Pendry, Tom
Tellers for the Ayes:


Penhaligon, David
Mr. Austin Mitchell and


Powell, Raymond (Ogmore)
Mr. James Hamilton.




NOES


Adley, Robert
Aspinwall, Jack


Aitken, Jonathan
Atkins, Rt Hon H.(S'thorne)


Alexander, Richard
Atkins, Robert(Preston N)


Alison, Michael
Atkinson, David (B'm'th,E)


Amery, Rt Hon Julian
Baker, Nicholas (N Dorset)


Ancram, Michael
Banks, Robert


Arnold, Tom
Beaumont-Dark, Anthony





Bell, Sir Ronald
Fraser, Peter (South Angus)


Bendall, Vivian
Fry, Peter


Benyon, Thomas (A'don)
Galbraith, Hon T. G. D.


Benyon, W. (Buckingham)
Gardiner, George (Reigate)


Best, Keith
Gardner, Edward (S Fylde)


Bevan, David Gilroy
Garel-Jones, Tristan


Biffen, Rt Hon John
Gilmour, Rt Hon Sir Ian


Biggs-Davison, John
Glyn, Dr Alan


Blackburn, John
Goodhart, Philip


Blaker, Peter
Goodlad, Alastair


Body, Richard
Gorst, John


Bonsor, Sir Nicholas
Gow, Ian


Boscawen, Hon Robert
Gower, Sir Raymond


Bottomley, Peter (W'wich W)
Gray, Hamish


Bowden, Andrew
Greenway, Harry


Boyson, Dr Rhodes
Grieve, Percy


Braine, Sir Bernard
Griffiths, E (B'ySt. Edm'ds)


Bright, Graham
Griffiths, Peter Portsm'th N)


Brinton, Tim
Grist, Ian


Brittan, Leon
Grylls, Michael


Brooke, Hon Peter
Gummer, John Selwyn


Brotherton, Michael
Hamilton, Hon A.


Brown, Michael(Brigg &amp; Sc'n)
Hamilton, Michael (Salisbury)


Browne, John (Winchester)
Hampson, Dr Keith


Bruce-Gardyne, John
Haselhurst, Alan


Bryan, Sir Paul
Havers, Rt Hon Sir Michael


Buchanan-Smith, Alick
Hawkins, Paul


Buck, Antony
Hayhoe, Barney


Budgen, Nick
Heddle, John


Burden, Sir Frederick
Henderson, Barry


Butcher, John
Heseltine, Rt Hon Michael


Butler, Hon Adam
Hicks, Robert


Cadbury, Jocelyn
Higgins, Rt Hon Terence L.


Carlisle, John (Luton West)
Hill, James


Carlisle, Kenneth (Lincoln)
Hogg, Hon Douglas (Gr'th'm)


Carlisle, Rt Hon M. (R'c'n)
Holland, Philip (Carlton)


Chalker, Mrs. Lynda
Hooson, Tom


Chapman, Sydney
Hordern, Peter


Churchill, W. S.
Howe, Rt Hon Sir Geoffrey


Clark, Hon A. (Plym'th, S'n)
Howell, Rt Hon D. (G'ldf'd)


Clark, Sir W. (Croydon S)
Howell, Ralph (N Norfolk)


Clarke, Kenneth (Rushcliffe)
Hunt, David (Wirral)


Clegg, Sir Walter
Hunt, John (Ravensbourne)


Cockeram, Eric
Irving, Charles (Cheltenham)


Colvin, Michael
Jenkin, Rt Hon Patrick


Cope, John
Johnson Smith, Geoffrey


Cormack, Patrick
Jopling, Rt Hon Michael


Corrie, John
Joseph, Rt Hon Sir Keith


Costain, Sir Albert
Kaberry, Sir Donald


Cranbome, Viscount
Kellett-Bowman, Mrs Elaine


Critchley, Julian
Kimball, Marcus


Crouch, David
King, Rt Hon Tom


Dickens, Geoffrey
Kitson, Sir Timothy


Dorrell, Stephen
Knight, Mrs Jill


Douglas-Hamilton, Lord J.
Knox, David


Dover, Denshore
Lamont, Norman


du Cann, Rt Hon Edward
Lang, Ian


Dunn, Robert (Dartford)
Langford-Holt, Sir John


Durant, Tony
Latham, Michael


Dykes, Hugh
Lawson, Rt Hon Nigel


Eden, Rt Hon Sir John
Lee, John


Edwards, Rt Hon N. (P'broke)
Lennox-Boyd, Hon Mark


Eggar, Tim
Lester, Jim (Beeston)


Elliott, Sir William
Lewis, Kenneth (Rutland)


Emery, Peter
Lloyd, Peter (Fareham)


Eyre, Reginald
Loveridge, John


Fairbairn, Nicholas
Luce, Richard


Fairgrieve, Russell
Lyell, Nicholas


Faith, Mrs Sheila
Macfarlane, Neil


Farr, John
MacGregor, John


Fell, Anthony
MacKay, John (Argyll)


Fenner, Mrs Peggy
McNair-Wilson, M. (N'bury)


Finsberg, Geoffrey
McNair-Wilson, P. (New F'st)


Fisher, Sir Nigel
McQuarrie, Albert


Fletcher-Cooke, Sir Charles
Madel, David


Fookes, Miss Janet
Major, John


Forman, Nigel
Marland, Paul


Fowler, Rt Hon Norman
Marlow, Tony


Fox, Marcus
Mates, Michael


Fraser, Rt Hon Sir Hugh
Mather, Carol






Mawby, Ray
Peyton, Rt Hon John


Mawhinney, Dr Brian
Pink, R. Bonner


Maxwell-Hyslop, Robin
Porter, Barry


Mayhew, Patrick
Powell, Rt Hon J.E. (S Down)


Mellor, David
Prentice, Rt Hon Reg


Meyer, Sir Anthony
Price, Sir David (Eastleigh)


Miller, Hal (B'grove)
Prior, Rt Hon James


Mills, Iain (Meriden)
Proctor, K. Harvey


Miscampbell, Norman
Pym, Rt Hon Francis


Mitchell, David (Basingstoke)
Raison, Timothy


Moate, Roger
Rathbone, Tim


Molyneaux, James
Rees, Peter (Dover and Deal)


Montgomery, Fergus
Rees-Davies, W. R.


Moore, John
Renton, Tim


Morgan, Geraint
Rhodes James, Robert


Morris, M. (N'hampton S)
Ridley, Hon Nicholas


Morrison, Hon C. (Devizes)
Ridsdale, Sir Julian


Morrison, Hon P. (Chester)
Rifkind, Malcolm


Mudd, David
Rippon, Rt Hon Geoffrey


Murphy, Christopher
Roberts, M. (Cardiff NW)


Myles, David
Roberts, Wyn (Conway)


Neale, Gerrard
Ross, Wm. (Londonderry)


Needham, Richard
Rost, Peter


Nelson, Anthony
Royle, Sir Anthony


Neubert, Michael
Sainsbury, Hon Timothy


Newton, Tony
St. John-Stevas, Rt Hon N.


Nott, Rt Hon John
Scott, Nicholas


Onslow, Cranley
Shaw, Giles (Pudsey)


Oppenheim, Rt Hon Mrs S.
Shaw, Michael (Scarborough)


Page, Rt Hon Sir G. (Crosby)
Shelton, William (Streatham)


Page, Richard (SW Herts)
Shepherd, Colin (Hereford)


Parris, Matthew
Shepherd, Richard


Patten, Christopher (Bath)
Shersby, Michael


Patten, John (Oxford)
Silvester, Fred


Pattie, Geoffrey
Sims, Roger


Pawsey, James
Skeet, T. H. H.


Percival, Sir Ian
Smith, Dudley





Speed, Keith
van Straubenzee, W. R.


Speller, Tony
Vaughan, Dr Gerard


Spence, John
Viggers, Peter


Spicer, Jim (West Dorset)
Waddington, David


Spicer, Michael (S Worcs)
Wakeham,John


Sproat, Iain
Waldegrave, Hon William


Squire, Robin
Walker, Rt Hon P.(W'cester)


Stainton, Keith
Walker, B. (Perth)


Stanbrook, Ivor
Walker-Smith, Rt Hon Sir D.


Stanley, John
Waller, Gary


Stevens, Martin
Walters, Dennis


Stewart, Ian (Hitchin)
Warren, Kenneth


Stewart, A (E Renfrewshire)
Watson, John


Stokes, John
Wells, John (Maidstone)


Stradling Thomas, J.
Wells, Bowen


Tapsell, Peter
Wheeler, John


Taylor, Robert (Croydon NW)
Whitney, Raymond


Taylor, Teddy (S'end E)
Wickenden, Keith


Temple-Morris, Peter
Wilkinson, John


Thatcher, Rt Hon Mrs M.
Williams, D.(Montgomery)


Thomas, Rt Hon Peter
Winterton, Nicholas


Thompson, Donald
Wolfson, Mark


Thorne, Neil (Ilford South)
Young, Sir George (Acton)


Thornton, Malcolm
Younger, Rt Hon George


Townend, John (Bridlington)



Townsend, Cyril D, (B'heath)
Tellers for the Noes:


Trippier, David
Mr. Spencer Le Marchant and


Trotter, Neville
Mr. Anthony Berry.

Question accordingly negatived.

Main Question put and agreed to.

Resolved,
That this House takes note of the White Paper on the Government's Expenditure Plans 1981–82 to 1983–84 [Cmnd. 8175.]

Northamptonshire Area Health Authority (Finance)

Motion made, and Question proposed, that this House do now adjourn.—[Mr. Mather.]

Mr. Bill Homewood: I had not long been a Member of the House before the topic that I am raising tonight was brought to my attention, namely, the under-funding of the National Health Service in the area covered by the Northamptonshire area health authority, which includes my constituency of Kettering. Since then I have had an almost constant exchange of correspondence with Ministers on the matter, and I rather expect that the Minister will tell me tonight that the many words that have passed between us during that time have had some effect.
I was informed the day before yesterday that the resource allocation from the Oxford regional health authority to the Northamptonshire area health authority for 1981–82 was only about 1·26 per cent. below target. It is therefore within the 2½ per cent. tolerance level accepted in such cases. Obviously, I am relieved at that, but it does not make me happy for the present or sanguine about the future.
The history of the Northamptonshire AHA's funding suggests that the current efforts of the Oxford regional health authority are too little, too late. The regional authority concedes something to the AHA only after a running battle over many months, during which the capital needs of the Nothamptonshire authority continue to increase. Since 1974–75 the resources allocations to Northamptonshire have been below target, year on year, by 11·9 per cent., 9·09 per cent., 9·29 per cent., 9·94 per cent., 5·83 per cent., 5·24 per cent. and 3·97 per cent. Even this year, when the Northamptonshire AHA will probably do better than in previous years, the resource allocation will be 1·26 per cent. below target.
The total underfunding in those years was 56·52 per cent., or £33 million at current prices. In other words, there has been a loss of seven months' funding in seven years. Those who have controlled the NHS facilities in Northamptonshire have had to spend one-twelfth of their time, on the basis of the target figures, dreaming money out of the air.
During the same period the regional health authority allocated to the Oxfordshire AHA year-on-year fundings above the target of 7·5 per cent., 7·82 per cent., 6·64 per cent., 5·57 per cent., 3·78 per cent., 4·04 per cent., and 5·04 per cent. This year, the funding is 4·36 per cent. above the target. Those figures work out at about five months' additional expenditure over seven years, which represents an enormous sum of money.
The methods used to determine targets were devised by the Resource Allocation Working Party and are not regarded as scientifically unchallengeable. Everyone in the medical world accepts that local circumstances may require those precepts to be ignored at times. However, the RAWP formula is the only attempt on record to provide a guide. If it is consistently ignored between Oxfordshire and Northamptonshire, it must mean that the allocating authority is relying on subjective judgments without recourse to anything except its instincts. There is a feeling

in Northamptonshire that those instincts bend too favourably to Oxfordshire and too unjustly to Northamptonshire.
As I said, this year's allocation to the Northamptonshire AHA is within the 2½ per cent. tolerance. To achieve that the regional authority moved the target so that not much extra money would be required. Apparently it bound itself with about £200,000 above the regional allocation requirements. The regional authority decided to give that sum to Oxfordshire, for no apparent reason, despite the fact that Northamptonshire had overspent by about £800,000 last year.
The persistent underfunding of the Northamptonshire AHA has produced a deprivation that must be put right. I hope that the Minister will offer some help tonight. I do not believe that the county's clinical services have suffered too badly. Medical staff in the county have determined their priorities to ensure that the patient is cared for. However, non-clinical services have suffered, especially the maintenance of hospital buildings.
In the long run that deterioration must be reflected in a decline in patient care, no matter how dedicated the medical staff are. No public service can constantly battle, as the medical world in Northamptonshire has done, against a shortage of funds without that ultimately having an effect on the morale of those required to carry out the service. Since I have been in this place I have received complaints from all quarters of the Health Service in Northamptonshire that the county is a poor relative of Oxfordshire, because Oxfordshire has within its boundaries a prestigious university and training hospitals that are known throughout the world.
In Northamptonshire there is a somewhat sublime admixture of Health Service circumstances. There is a rising population in Northampton new town. In Wellingborough we have a London overspill. In Corby we have yet to discover what the health hazards will be from the alarming level of unemployment. The regional authority's recent allocation paper forecasts an overfunding of Northamptonshire's requirements in a few years' time. My constituents and others in Northamptonshire will be suspicious of that forecast when they examine the Oxford RHA's record of projection over the past few years and when they realise that the RHA produces no facts to support the basis of its projections.
My constituents will be even more concerned to find in the recent RHA's report no reference to the great and persistent overfunding that the Oxford AHA has enjoyed for many years. Apparently it will continue to enjoy overfunding unless the RHA is induced to produce a more equitable position between Oxfordshire and Northamptonshire.
The people of Northarnptonshire are wondering when the RHA will say that they have suffered many years of underfunding, giving rise to the current situation, where it is estimated that expenditure of about £1·5 million is required to bring the dilapidated Northamptonshire Health Service buildings to the general state of those in the rest of the region. One cannot count in money what happens to patients over the years. One can only consider capital projects and say that the buildings are dilapidated. One cannot estimate the cost to individuals of that underfunding over the years.
All my correspondence with the Minister on the matter has produced no effective response. The attitude of Ministers appears to be that RHAs must be right, no matter what evidence to the contrary is laid before them.
All those engaged in Health Service work—at whatever level—in Northamptonshire believe that the service is being shabbily treated by the Oxford RHA on the question of funding. That authority is believed to be heavily prejudiced in Oxford's favour. The Minister should activate some measures to remove what I consider to be a gross inequity for Northamptonshire. I hope that he will say that he is prepared to do that.

Mr. Michael Morris: The hon. Member for Kettering (Mr. Homewood) has done a credit to all of us in Northamptonshire in raising this subject in the week in which we have had the figures from the RHA.
I support every word that the hon. Gentleman said. I have raised this matter over seven years in the House. To date, we are not much further down the road. My hon. Friend the Under-Secretary will appreciate that we are now the fastest-growing area in the United Kingdom, because we take in 60 per cent. of Milton Keynes. We shall continue to do so until it has its own hospital. We have the fastest bed throughput in the United Kingdom. I believe that we have done more in terms of closing units to meet targets than any other area health authority in the country.
As I said in the Public Accounts Committee last week, before the permanent under-secretary, the five Members in the Northamptonshire area are not satisfied with the deal from the Oxford region. It has not been done equitably and fairly. There is now a complete lack of faith in the management of the Oxford region, even to the extent of covering the whole of the medical profession, the administrative staff, all the local councils and the Members of Parliament.
The time has come when I hope that my hon. Friend will give some words of encouragement to the hon. Member for Kettering. If he does not do so this evening, we shall seek a meeting with the Minister for Health, because the matter must now be put right.

The Under-Secretary of State for Health and Social Security (Sir George Young): I feel somewhat diffident at responding to this debate because I went to the prestigious university that has been blamed for part of the misfortunes of the Northampton area health authority.
There has been a vigorous and courteous exchange of correspondence with the hon. Member for Kettering (Mr. Homewood). My hon. Friend the Member for Northampton, South (Mr. Morris) has been fighting this battle for as long as he has been in the House. I can offer some encouragement to both hon. Members.
The answer lies in what the hon. Member for Kettering said at the beginning of his speech, that the decisions of the Oxford regional health authority are now moving in Northampton's way. The forecasts show that by 1985–86 the Northampton AHA will be 2 per cent. over its RAWP target, having been behind it for many years. Therefore, there are signs of progressive improvement. That is due in no small part to the advocacy of the hon. Members who represent Northamptonshire.
I know that the allocation of funds has been of great concern, and I welcome the opportunity to explain what has been going on. Perhaps I can briefly sketch in the background as to how allocations to help authorities are made. As both hon. Members know, my Department does not allocate funds to area health authorities. We allocate them to the regional health authorities, and we do that in accordance with the recommendations of the Resource Allocation Working Party. The methods used are complex, but, briefly, the allocation process involves weighting regional populations to reflect health care needs and then expressing these in cash term to produce target allocations of the total resources available. Each year, updated targets are compared with regions' existing resources to determine the latest levels of health care provision, and we make a decision on how far we can redistribute, so that each region has its target achieved.
In terms of RAWP, the Oxford region, in which Northampton AHA finds itself, is more or less on target; in other words, its share of the total cake matches its relative need. However, the need is increasing because of the increasing population, and the region's population growth is, indeed, significant. It is the highest rate of growth in the country. Account is taken of the population growth in the allocations made to the region. Although population growth is generally high, it is particularly high in the new towns of Milton Keynes and Northampton, which make a major contribution to the growth, and special account is taken of the needs of these new towns.
For the past four years the Oxford region has received a revenue addition specifically to help the development of health services in Northampton and Milton Keynes. This is the result of a transfer of funds from the Department of the Environment's new towns programme to the Department of Health and Social Security. The two new town development corporations accepted a cut in their capital allocations so as to make this possible. For 1981–82 a sum of £784,000 has been included in the regional health authority's normal allocation, to be shared equally between the two new town developments.
The distribution of capital resources is also made in accordance with the recommendations of RAWP. The limited resources available are shared on a basis of need. The relative need of a region is determined both by the requirements of its population and the extent to which these requirements are being met from the capital facilities already available. Oxford is better stocked than many regions, and has a relatively higher proportion of middle-aged, and hence healthier, groups in its population and fewer in the very elderly group. We take those factors into consideration when we make capital allocations. However, both hon. Members have been complaining about the allocation of capital and revenue resources to AHAs by the RHA, and, as was said, this is the responsibility of the RHA.
It is consistent with our policy that we should delegate these decisions to RHAs. We firmly believe that decisions affecting local services are best taken by those with a full knowledge of local needs and priorities. We expect RHAs to apply the RAWP principles as far as possible in making allocations to their areas. We have given guidance to RHAs on the way in which they should set about doing this. We make it clear that a mechanistic adherence to RAWP formulae may be of less importance in the distribution of resources to AHAs than in the distribution of resources from central funds to RHAs, because local


factors inevitably figure more prominently in the decisions that RHAs have to take when they distribute the funds to the smaller AHAs.
I shall now deal with the points raised about discrimination. It is true that the revenue allocation made to Northamptonshire in 1980–81 was almost 4 per cent. below the area's RAWP target. I know that the RHA aims to bring its areas within a 2½ per cent. band above or below target, and, as the hon. Gentleman said, it looks as if the RHA has now achieved that objective with the current year's allocation. However, the rate of progress towards target is a matter for the RHA, when it has considered all the relevant factors affecting resource allocation in the region.
I have looked into this in some depth, and I am satisfied that the Oxford RHA has applied the RAWP principles fairly strictly in calculating target allocations for its constituent areas, but it has had to give due regard to the very limited moneys available and the competing priorities involved. Additional resources are tight, and from within them the RHA has to plan to meet new needs in new towns, to provide for growth elsewhere, to overcome deprivation that exists and to develop services that are below standard. There have been particular problems, as both hon. Members know, relating to the commissioning of the John Radcliffe hospital in the city of Oxford.
That hospital was planned and construction started before we moved to the new RAWP system, which required the health authorities to find the necessary revenue from within their global allocations. The new hospital was opened in 1979 on a "level transfer of services" basis only—with £¾ million additional revenue costs—and a very large percentage of the region's growth money has had to go towards this. The regional health authority was struggling at the same time to find the revenue to open phase 6 of the Royal Berkshire hospital at Reading. With limited growth money in recent years and a need to fund contributions to major developments already under way, the amount left has been insufficient to have a major effect on the distances from target of the areas within the region, particularly Northampton.
I have raised this with the RHA, which confirms that it shares both hon. Members wish to see Northamptonshire area health authority move to its RAWP target as quickly as possible. I know that there has been a very strong feeling that Oxford area health authority in particular has benefited over the years at Northamptonshire's expense. It is certainly true that Oxford is still above its RAWP target. The regional health authority has, however, had a very difficult task. It has had the problem not only of commissioning the newly-built John Radcliffe hospital but of trying to move Oxford towards target without having to make drastic cuts in the Oxford area's existing services.
Movement has been slow—far too slow for both hon. Members—but the region has been continuing to move in the right direction. The Oxford area was 5·57 per cent. above its RAWP target in 1977–78 but only 4·06 per cent. above target in 1981–82. It is expected that by 1985–86 it will be only 2·3 per cent. above target, which is roughly what Northamptonshire AHA will be above target if the RHA's projections are correct, so the discrimination will have been eliminated. As I said, Northamptonshire, too, has continued to move nearer its revenue target, so I think that it is fair to say that the future prospects look brighter.
As has been pointed out, Northamptonshire is at present having to cope not only with its own population growth but

with meeting the needs of about half the population of Milton Keynes. This has placed a very real strain on the health services in Northamptonshire. However, a start on building the first phase of the new district hospital for the people of Milton Keynes was made last year, and it is expected to be in use by 1984. A second phase is planned to start in 1984 or 1985. These new facilities will ease the pressure on hospital services in both Northampton and Stoke Mandeville hospitals, to which the population of Milton Keynes has to look at present for these services.
Also, an additional 120 beds are to be provided at the Northampton general hospital to meet the needs of the growing population. That development is expected to be completed in 1982. Northamptonshire's capital position has in recent years been better than that of its revenue position. A significant proportion of the region's capital funds has gone to Northamtonshire, mainly on the developments in Kettering and Northampton general hospitals. Further substantial developments at Northampton general hospital are planned.
The news on future revenue funding is also better. The regional health authority has now considered its revenue allocations for 1981–82 and has made refinements in the calculation of targets in the region. This shows that the previous assessment of 4 per cent. underfunding was wide of the mark and that the area approached the start of this financial year only 1¼ per cent. below target. This new assessment—which hon. Members may view with some suspicion—arises in the main from a new method of dealing with services for the mentally handicapped, 'which are well developed in Northamptonshire. The growth money being allocated to Northamptonshire this year will be £675,000, which will mean that Northamptonshire has moved to only 0·64 per cent. below target. I am sure that this will be very pleasing to both hon. Members and to those other Members who have constantly expressed their concern about Northamptonshire's position in the past.
Looking to the future, the regional health authority intends to make provision for a number of planned "steps", if I may call them that, in activity in various parts of the region. These include the provision of services for the mentally ill and elderly severely mentally infirm in East Berkshire—a development of the highest possible priority—provision for commissioning of Witney hospital, completion of the opening of phase 6 of the Royal Berkshire hospital, the opening of the new hospital now under construction at Milton Keynes, and of the next phase of development at Northampton. Over a period the region needs to increase allocations to its relatively deprived areas. It also needs to allow for development of regional services which the individual area health authorities could not be expected to finance.
To accommodate these steps it is proposed that it should, in effect, set up a fund that will be created by allocating part of the increment that it receives this year on a non-recurrent basis to the two areas—Northamptonshire and Buckinghamshire—with special short-term problems arising from, among other things, the need to provide for Milton Keynes pending completion of its hospital.
At its meeting last week the regional health authority considered a strategy which, over the coming five years, will meet these needs. The region intends to meet these pressing needs and at the same time to avoid reductions in allocations to individual areas which could have punitive effects.
I have already mentioned the two major changes in fortune that Northamptonshire can expect over the future years—the bringing into use of a further 120 beds and the reduction in demand on its services when the Milton Keynes hospital becomes operational.
What will be even more pleasing to the hon. Members is that the regional health authority's plans do not envisage that there will be any reduction in allocation on account of this reduction in demand. The prospect is that by the mid-1980s the area will be financed by 1 or 2 per cent. above target. So in five years Northampton's relative position will have moved from 0·64 per cent. below target to something like 1 per cent. above.
Doubtless hon. Members representing other parts of the region will be demanding Adjournment debates, pointing to the favourable position of Northamptonshire, and demanding equal treatment for themselves. When that happens the RHA's attention will be firmly riveted on these other relatively deprived areas in the region, and there, I hope, will develop steps in their allocation, just as is now being done for Northampton. I hope that this news will be welcomed, as there have been some wrongly informed but genuine fears that Northamptonshire would not be on target before the early part of the next century.
The RHA has made a very real attempt at identifying and getting to grips with the main problems. It has plotted a course that, over time, brings a measure of equity and of progress towards declared objectives. I hope that the argument that Northamptonshire has been blatantly discriminated against has been to some extent dealt with in this half-hour. I hope that both hon. Members will be satisfied that the prospects are now much better and that they can now accept that the region is fully appreciative of the problems in Northamptonshire and is planning constructively to ease them.
The effect of population changes between 1981–82 and 1985–86, plus the reversal of patient flows to Milton Keynes, is dramatic for the Northamptonshire AHA. The RHA is sensitive to pressures on services in the various parts of the region and takes account of them in making decisions.
I hope that both hon. Members will now agree that the region is making progress in helping Northamptonshire to reach its RAWP target and so ease the problems that they have both rightly brought to the attention of the House.

Question put and agreed to.

Adjourned accordingly at eighteen minutes to Eleven o' clock.